Business , Economy , Banking News - MAY

This thread will be for Daily Business Update (Copy Pasted from Various Newspapers .

India to launch FTA talks with Australia

The Prime Minister's Trade and Economic Relations Committee (TERC) on Saturday gave its nod for launching free trade agreement (FTA) negotiations with Australia. It also decided that India will not take Intellectual Property Rights (IPR) obligations beyond the domestic laws or mandated by World Trade Organization (WTO).

The committee also took up the proposal for a new economic engagement through the mechanism of free trade agreement with Common Market of Eastern and Southern Africa (COMESA).

These important decisions were taken during a meeting of the TERC chaired by the Prime Minister, Manmohan Singh, on Friday but the statement on the subject was released by the PMO (Prime Minister's Office) on Saturday. Putting across strongly that India will not succumb to pressure from European lobbies or European Union states on the issue of IPR regime, the statement said “The Prime Minister has directed Indian negotiators not to take IPR obligation, particularly in pharmaceuticals, beyond domestic laws or as mandated in a WTO pact while entering into an FTA with the European Union”.

Indian stand

Reviewing the status of the negotiations, TERC observed that certain concerns have been raised about the Indian stand on issues relating to intellectual property rights, especially in the context of pharmaceutical products. The EU has been demanding that India should enforce a stricter IPR regime than what has been mandated in its domestic laws and the WTO agreement on TRIPS.

The TERC, headed by the Prime Minister, also approved the launch of negotiations for an FTA with Australia. The matter is likely to be taken up during the visit of Union Commerce and Industry Minister Anand Sharma when he visits Australia on May 10.

Kamath to take over as Chairman of Infosys

The board of directors of Infosys, which met here on Saturday, decided to appoint K. V. Kamath as the Chairman of Infosys after its founder N. R. Narayana Murthy steps down from his position as Chairman on August 20 when he turns 65. The top leadership of the company addressed a crowded media conference and stressed that the company has opted for change, while seeking to maintain a degree of continuity.

The board also decided to appoint the company's CEO and Managing Director S. Gopalakrishnan as Co-chairman of the board. Chief Operating Officer S. D. Shibulal will take over Mr. Gopalakrishnan's duties. All the appointments are to take effect from August 21. Mr. Murthy has been appointed Chairman Emeritus.

Prof. Jeffrey Lehman, the chairperson of the three-member Nominations Committee, which included Mr. Kamath said the appointments indicate Infosys' resolve to ‘maintain continuity with change.' “The decision to appoint Mr. Kamath was unanimous,” he said. Mr. Kamath “recused himself” from the selection process as soon as it became apparent that he was in the running for the post of Chairman, Prof. Lehman added. Prof. Lehman said the appointment of Mr. Gopalakrishnan as Co-Chairman reflected the desire to maintain continuity at the top of the company. Prof. Lehman described Mr. Murthy as ‘an iconic figure' who had steered the company through three decades. He said the company would consider the appointment of a Chief Operating Officer “later, at an appropriate time.”

Mr. Murthy described Mr. Kamath, who is now non-executive Chairman of ICICI Bank, as “an extraordinary leader.” Mr. Kamath, he pointed out, had steered ICICI from being development finance institution into a universal bank. Mr. Murthy said Mr. Gopalakrishnan's stature as “an elder brother figure” in the company would help it maintain its “strategic vision.”

Asked if Infosys could face challenges without his guidance, Mr. Murthy said Infosys has managed “tougher challenges in the past, when the country was much more business unfriendly.” “We managed despite being much smaller with limited resources,” he added.

Mr. Kamath announced that three new members would be inducted to the board before the company's Annual General Meeting in June. Describing Infosys as “a shining star of emerging India,” Mr. Kamath said he was honoured to accept the position with humility. “It is not possible for me to take Murthy's position; after all, he has quietly mentored me for the last 15 years,” he remarked.

Country's leading life insurer SBI Life will invest up to Rs 9,600 crore in Indian equity market this fiscal, taking its capital market exposure to over Rs 34,000 crore, a senior company official said today.

"We will make incremental investment of about Rs 16,000 crore in securities in 2011-12, of which 60 per cent would go to the stock market," SBI Life Insurance managing director M N Rao told PTI.

The life insurer has an investment of about Rs 25,000 crore in equities.

"This incremental investment will take the total exposure in capital markets to over Rs 34,000 crore," he added.

The company, which managed assets worth Rs 40,163 crore at the end of March 31, expects over 40 per cent growth in its assets under management (AUM) during the current fiscal.

"We expect to take our AUM to about Rs 60,000 crore. For this, we will make investments in market instruments," Rao said.

SBI Life Insurance is a joint venture between State Bank of India and France-based BNP Paribas Assurance. SBI owns 74 per cent of the total capital in the JV and the rest is held by BNP Paribas Assurance.

For the financial year ended March 2011, the life insurer reported a 33 per cent growth in net profit at Rs 366 crore. Its total premium income grew by 28 per cent to Rs 12,912 crore during the period.

During the fiscal, the new business premium collection stood at Rs 7,572 crore, which is a rise of 7 per cent over the previous financial year.

The company is planning new products in the unit-linked as well in traditional segment for which it has applied to the insurance regulator IRDA.

On company's plans to raise funds from the capital market, Rao said SBI Life is a well capitalised company and does not need funds as of now.

"We will wait for clarity on Insurance Bill and IPO guidelines. The initial public offer (IPO) is unlikely to happen in the next 2-3 quarters," he said.

The paid up capital of SBI Life Insurance stands at Rs 1,000 crore.

The Bill, pending with a Parliamentary Standing Committee, has proposed to increase the foreign share holding limit in an Indian insurance firm to 49 per cent from the present 26 per cent. PTI JD NKD MVS RAH 05011008 NNNN

The stock market may undergo a phase of consolidation this week in light of the RBI's policy meet on Tuesday and the announcement of the quarterly results of various companies, including Hero Honda Motors and Bharti airtel.

According to experts, there is a lack of a catalyst to lift the equity market out of its current range. Investors must not get adventurous for the time being and wait for more clarity on the direction of the main indices, they said.

"Overall, the sideways consolidation pattern could persist in May also, as quite a few key companies are yet to announce their results," IIFL Head of Research (India Private Clients) Amar Ambani said.

The Bombay Stock Exchange's 30-share Sensex index fell by 466.27 points to settle at 19,135.96 in the week gone by on FII selling, mixed corporate earnings, high inflation, hardening interest rates and concerns over the 2G scam.

"The RBI credit policy and quarterly results are the major factors to determine the market trend this week. Most of the global markets are at two-year highs after the US Fed kept interest rates unchanged at 0.25 per cent and announced a USD 600 billion treasury buy-back," Motilal Oswal Securities Associate VP Senior Analyst Technical Equities Parag Doctor said.

He said, however, that continued FII selling, fear of a hike in interest rates by the RBI and concerns over the 2G scam have created a negative sentiment in the market.

Analysts also said that investors must remain cautious as there are no major short-term triggers for the market to rise materially.

Market players also said that on May 3, the RBI is expected to raise key short-term rates again, as inflation still remains high. If the rate increase is 50 basis points, the market may look a little negative, they feared.

Bank of India will announce its Q4 results on May 2. Hero Honda Motors Q4 results will come up on May 4, followed by Bharti Airtel, Kotak Mahindra Bank and Cipla, whose results will be announced on May 5.

Insurance buyers will soon be able to open demat or 'e-insurance' accounts for their contracts which will allow them to hold policies in electronic form. Having an -insurance account will reduce hassles for buyers as it does away with the need to provide age and address proof every time a policy is bought. It will also save insurers crores in printing and dispatching policies.

The move will bring in benefits similar to the efficiency gains in the capital markets after Sebi introduced dematerialization of equities. Dematerialization in capital markets speeded up transactions, dramatically reduced transaction costs and completely eliminated fraudulent transactions.

Taking a leaf out of the securities market, the Insurance Regulatory and Development Authority wants to create insurance repositories on the lines of securities depositories like the National Securities Depository or the Central Securities Depository. These repositories will be licenced by the regulator and connected to all insurance companies.

In tandem with leadership succession plan and move to transform the company into a next-generation global player in IT arena, Infosys Technologies said it will be renamed as Infosys Ltd.

Co-Chairman-designate S Gopalakrishnan said that Infosys has a broad range of services all the way from consulting to business process outsourcing and the company's focus is to help clients achieve business results.

"We felt that the brand Infosys is so strong that we would like to rename the company as Infosys Ltd," Gopalakrishnan said.

"It's part of our 3.0 vision...", he said.

The company in a regulatory filing to the Bombay Stock Exchange said that the "Board of Directors approved the proposal of changing the name of the company from Infosys Technologies to Infosys Ltd".

The company will seek shareholders' approval on the proposal at its Annual General Meeting on June 11, 2011.

Noting that Infosys is already a respected global brand, the CEO-designate SD Shibulal said, "our aspiration is to build the next generation global consulting and services corporation".

The proposed Infosys 3.0 strategy would have three dimensions including strengthening the company's strategic partnership with its clients and evolving its business model, Shibulal said.

"..we are also making other organisational changes to strengthen our market position and ability to serve our clients better," he said.

Officials said the Board had also decided to raise the retirement age for chairman of the company from 65 years to 70 years but this would not be applicable to the company's founders.

Shifting from its usual practice of naming founders as Chairman, the company on Saturday announced the appointment of former CEO of ICICI Bank KV Kamath as its new Chairman.

The board has also named current Chief Executive Officer S Gopalakrishnan as co-chairman, while COO S D Shibulal has been elevated as the CEO.

In a rare case of a Chinese company investing directly in India instead of relying on exports, a leading truck manufacturer has inked an investment deal with the Maharashtra government.

Beiqi Foton Motor, one of China's leading manufacturers of commercial vehicles, plans to put in $380 million on a assembling plant in Maharashtra, State media said.

The company has also promised to mostly source parts and components from local producers instead of importing them from China, the State media indicated. The company termed it as an important move in its globalization drive.

A report from Mumbai suggested the proposed plant will produce 100,000 trucks a year.

The plant will have the full range of production capabilities to churn out both heavy and light trucks to meet different kinds of demand in the Indian market, the official Xinhua news agency quoted the company's public relations chief, Wang Shuguang, as saying.

The location of the plant has not been finalized and could be in Mumbai or Pune with several options available, Wang said. The Beijing based Beiqi Foton Motor will also establish a separate company to handle sales.

The company sold over 600,000 vehicles in 2009, which was highest by any company in the world, Xinhua said. It also has vehicle assembling plants in Indonesia, Thailand, Mexico and South Africa.

Beiqi Foton Motor made a net profit of $168.7 million in the first half of this year, rising at a stunning rate of 153% over the level achieved in the same period last year.

The
Central Government has set in motion the process for formulation of the
XII Plan (2012-17) starting April 1, 2012, with a tentative intent to
achieve a GDP (gross domestic product) growth of about 9-9.5 per cent
during the five-year period.

As has been the practice for the
past many decades, the exercise involves the firming up of an approach
paper prepared by the Planning Commission which lays down the major
targets in the economic and social sectors, the key challenges and
resources that are required in meeting them and the broad strategy that
must be adopted to achieve these objectives.

Once a consensus is
reached on the desired objectives and targets in consultation with the
ministries and departments concerned, the approach paper is to be
cleared by the Union Cabinet and placed before the National Development
Council (NDC), comprising the Centre and chief ministers of all States,
for final approval to facilitate implementation.

But in a radical
departure from yesteryears when the targets and objectives of the Plan
period were decided by the Centre and the States, the Commission this
time round has sought to develop an inclusive and participative approach
to the entire planning process.

Towards this end, it has evolved
a web based consultative process in which all interested citizens and
stakeholders can participate by giving their views and suggestions on a
multi-dimensional strategy matrix that has been developed indicating
some of the key areas that need to be explored.

Thus, for the
first time in the history of India's policy planning, the inclusive
approach has led to commencement of a wide consultative process on the
challenges for the XII Plan.

According to the Commission, apart
from 900 civil society organisations (CSO), industry associations and
think-tanks across the country that have participated in the inclusive
planning process, over 32,000 netizens have left “many insightful
comments” following the launch of a dedicated website ( http://12thplan.gov.in) which is also linked to Facebook.

Startling feedback

The
feedback received through this people's participation process has been
startling, though not unexpected. In its presentation paper titled
‘Issues for approach to the XII Plan' prepared for the full meeting of
the Planning Commission presided over by Prime Minister Manmohan Singh
on April 21, the Commission said that there was a strong demand from all
sectors of society to improve implementation accountability and service
delivery.

Among the other key messages from such consultation,
while citizen groups broadly support the stated objectives of other
government programmes, the design and institutional arrangements are
weak and greater devolution and empowerment is needed. Besides,
government programmes need a new architecture which means greater
localisation, break-down of silos, feedback from citizens and mechanism
for learning and sharing of best practices.

Moreover, since a
major contribution to economic growth now comes from the private sector,
the need is for a policy environment that supports this dynamism.

In
effect, people want the government to create an environment for
nurturing enterprise, improving markets, supporting innovation,
providing access to finance and inculcating respect for common pool
resources.

Referring to the people's concerns in his concluding
remarks at the full meeting on April 21, Dr. Singh said: “There was
general agreement that the Planning Commission should focus on policy
and governance reforms, while working towards a growth target of between
9 and 9.5 per cent for the XII Plan.

“We should also set
monitorable targets related to different dimensions of inclusiveness,
and then work to achieve these targets by appropriate design of policy
and funding of Plan schemes.”

Although euphemistically referred
to by Dr. Singh as ‘policy and governance reforms', simply put in blunt
terms, the people's concerns (read disgust) pertain to the leakage,
pilferage, graft and corruption that have seeped into the government's
various social and other welfare programmes with regard to
implementation, accountability and service delivery, be it the supply
and distribution of PDS (public distribution system) grains and fuel
such as subsidised kerosene and even the much touted Mahatma Gandhi
National Rural Employment Guarantee Scheme (MGNREGS).

Host of scams

In
an environment of ongoing investigations into a host of scams — CWG, 2G
and Adarsh Housing — the malady of corruption has become so
all-pervasive that people are seeking deliverance from this deep-rooted
scourge. Perhaps, it is this exasperation that explains the overwhelming
people's movement that was witnessed when social activist Anna Hazare
went on a fast-unto-death in April to press his demands on the Lokpal
Bill. More recently, a survey by the Centre for Media Studies revealed
the role of corruption and graft in the everyday life of the common man,
especially in the rural areas even in the procurement and availability
of basic amenities such as PDS grains and kerosene, ration card, water
for farm use and for enrolment as a BPL (below poverty line) household.

Clearly,
more than allocating larger resources for grandiose programmes, half
the battle can be won if the government can effectively plug the
loopholes in the delivery mechanism of commodities as well as services
through close monitoring and by meting out exemplary punishment to the
guilty, however high and mighty they may be.

Growth parameters

Coming
back to the economic growth parameters being laid down for the XII
Plan, a GDP expansion of 9-9.5 per cent may appear low, considering that
the XI Plan (2007-12) was projected to end with a growth of 9 per cent,
if not double digit. Perhaps, it would have, but for the effect of the
drought and the impact of the global financial crisis that put even the
most advanced and developed economies into a tailspin and are yet to
emerge from the setback.

In the event, it is remarkable that the
XI Plan is officially being projected to end with a growth rate of 8.2
per cent. According to the Planning Commission, the basic objective of
the XII Plan is to facilitate and achieve faster, more inclusive and
sustainable growth and realistically, in this context even a growth rate
of 9 per cent will need strong policy action wherein energy, water and
environment present major sectoral challenges.

To achieve greater
inclusive growth, the Commission has stressed the need for better farm
sector performance with a growth of at least 4 per cent, faster creation
of jobs, especially in manufacturing, which needs to grow by about
11-12 per cent annually, stronger efforts at health, education and skill
development, greater effectiveness of programmes directly aimed at the
poor along with special programmes for socially vulnerable groups.

Towards
this end, it has called for reduction in the number of
Centrally-sponsored schemes to a few major programmes so as to achieve
better coordination and monitoring. Essentially, the Plan target is
sought to be achieved by striving to attain 100 per cent literacy,
inclusive growth schemes and development of the country's physical and
social infrastructure within the overall target of fiscal consolidation.

In
effect, it would mean increased allocations for health, education and
skill development to the extent of at least 1.2 per cent of the GDP,
especially as these sectors had received less than what was projected
for them during the XI Plan.

Similarly, infrastructure, including
irrigation, watershed management and urban infrastructure will require
an additional 0.7 percentage point of the GDP over the five-year period.
The Commission has pointed out that since the Centre's gross budgetary
support (GBS) is to rise by a mere 1.3 percentage points over the five
years, all other sectors will have a slower growth in allocations.

The
Prime Minister has asked the Planning Commission to revise the draft
approach document after consultation with the states and circulate it to
the Central ministries concerned so as to pave the way for Cabinet
clearance and final approval of the NDC some time in July.

Mis-selling of derivative products: RBI acts

Industry,
especially the exporting community, welcomed the recent move of the
Reserve Bank of India slapping a maximum penalty, according to the
Banking Regulation Act, on 19 commercial banks for mis-selling illegal
derivative products to exporters.

The RBI has recently imposed
penalties on 19 commercial banks for contravention of various
instructions issued by the central bank in respect of derivatives, such
as, failure to carry out due diligence in regard to suitability of
products, selling derivative products to users not having risk
management policies and not verifying the underlying/adequacy of
underlying and eligible limits under past performance route.

In
2007-08, many exporters suffered enormous losses from currency
derivatives due to extreme volatility in the currency markets. Majority
of them were small and medium enterprises (SMEs) involved in export
activities which were not having enough expertise in parking their funds
abroad. Now even the income-tax department is treating these losses as
speculative in nature and disallowing in the computation of income of
corporates/SMEs. This adds fuel to the fire of the already loss-suffered
exporters.

Though the regulator's action was very late and the
amount was a paltry sum, this move of the central bank would vindicate
the three-year old stand of industry associations like the Forex
Derivative Consumers' Forum that the banks sold illegal products,
besides helping exporters/SMEs in getting justice from various courts.
In the last three years, the small and medium scale exporters suffered
enormous difficulties, financial loss and mental agony pursuant to the
derivative losses booked on them.

Some exporters peg their actual
financial loss in the range of Rs.1.5-2 crore annually. Further
industry experts like S. Dhananjayan noted that even though the RBI
charged these banks a maximum penalty as per the law, this action was
grossly inadequate taking into account the actual losses suffered by the
exporters were of the order of Rs.32,000 crore. Considering the huge
disparity between the losses suffered and the penalties imposed, is it
time to introduce legislation with more teeth so that market
participants are deterred from indulging in such blatantly and patently
illegal activities

Accountability

There is a need to fix
the accountability as to at which stage of the decision making process
these illegal products were permitted to be sold to gullible exporters
and action taken on the culpable bank officials. This requires a
thorough and systematic investigation, which is beyond the domain of the
RBI. However, the Fixed Income Money Market and Derivative Association
of India (FIMMDA), a self regulatory organisation of bankers dealing in
derivatives, obtained a stay from the Supreme Court against the Orissa
High Court order, which directed for a thorough CBI probe in this issue.

In
the year 2007, few banks started aggressively marketing certain exotic
derivative contracts projecting the same as an alternative profit making
mechanism available to exporters whereas actually these contracts had
exposed the exporters to enormous risk. Within a few months, the
contracts started resulting in huge losses to the exporters.

A
PIL was filed before the Orissa High Court by Pravanjan Patra in April
2009 seeking direction to order for a CBI probe on the issue of forex
derivatives. The Orissa High Court ordered preliminary enquiry to be
conducted by the CBI and the RBI. In response to the order, both the RBI
and the CBI confirmed that serious irregularities and violation of the
Foreign Exchange Management Act had taken place in these forex
derivative contracts sold by banks.

Taking into account the
submissions of various parties and the findings by the CBI and the RBI,
the Orissa High Court on December 24, 2009, ordered the CBI to register a
case and carry out thorough investigation. During February 15 to 18,
2010, the CBI has sought presentations from various organisations
including several banks, the Forex Derivative Consumers' Forum and the
RBI.

Subsequently on February 19, 2010, the Supreme Court has
stayed the CBI investigation upon a petition to this effect filed by
FIMMDA. The last hearing of the Supreme Court was on November 8, 2010.
Now the matter will come for further hearing on September 26, 2011.

The
RBI has laid down well intended guidelines taking into account the
potential damage that could be caused on account of mis-sale of these
derivative products.

The present derivative fiasco could have
been entirely avoided if the guidelines of the RBI were followed.
Instead of responsibility and circumspection, one could evidently see
aggression and recklessness on the part of the banks while marketing
these exotic derivative products.

It is also worth mentioning the
remark made in the Development Research Group report of the RBI under
study No. 32 titled “Monetary Policy, forex markets, and feedback under
uncertainty in an open economy” in page 14 of the report which reads:
“In 2007, market expectations of the rupee-dollar rate had even reached
32, many corporates borrowed abroad based on such expectations
increasing currency risk. Some had entered into the so called hedging
deals, which were actually bets on the value of Swiss franc. With the
volatility in currency markets and steep rupee depreciation in 2008,
many firms lost money. Many such deals, where Indian banks were often a
front for foreign banks, sidestepped existing rules that prevented
leverage or underlying risk that exceeded export income.

Although
firms were not allowed to write options, deals were structured so that
in effect firms were writing options. The deals were so complex that
firms sometimes did not understand what the risks they are taking.”

This
is a clear finding by the RBI which reveals the extent to which banks
have side stepped the regulations while selling these derivative
contracts.

Public sector lender Allahabad Bank today reported a 14.7 % increase in net profit to Rs 257.6 crore for the fourth quarter ended March, 2011, compared to Rs 224.5 crore in the corresponding year-ago period.

Total income rose to Rs 3,588.6 crore during the January-March period of FY'11 from Rs 2,608.6 crore in the same period a year ago, Allahabad Bank said in a filing to the Bombay Stock Exchange.

The board of the bank has recommended a dividend of 60 %, or Rs 6 per share, for the 2010-11 financial year, it said.

For the full financial year ended March 31, 2011, the Kolkata-based lender posted a net profit of Rs 1,423.1 crore, up 17.9 % from Rs 1,206.3 crore last fiscal.

The bank's total income during 2010-11 rose to Rs 12,385.1 crore from Rs 9,885.1 crore last fiscal.

On a consolidated basis, the bank's profit rose by Rs 1,439.5 crore from Rs 1,228.4 crore for the year ended March 31, 2010.

Indian Overseas Bank could report a good performance in its platinum jubilee year with a significant rise in deposits and advances and in net interest income. The measures adopted by the bank to control costs helped boost the bottomline.

Addressing presspersons here on Monday, M. Narendra, Chairman and Managing Director, said, treasury operations, corporate and retail banking resulted in a healthy growth.

The directors have proposed a dividend of Rs. 5 against Rs. 3.50 per share in the previous year.

The bank registered a growth of 55 per cent in operating profit to Rs. 2,860.63 crore in the year ended March 31, 2011, from Rs. 1,844.62 crore in the previous year. The net profit rose by 52 per cent to Rs. 1,072.54 crore from Rs. 706.96 crore. Net earnings stood at Rs. 19.63 against Rs. 12.98 per share in the previous year

Total income was higher by 17 per cent to Rs. 13,326.57 crore from Rs. 11,389.03 crore.

Total expenditure, excluding provisions and contingencies, stood at Rs. 10,465.93 crore against Rs. 9,544.41 crore with interest expenditure accounting for Rs. 7,893.44 crore (Rs. 7,077.90 crore). The bank has provided a sum Rs. 89 crore towards transitional liability on a proportionate basis on employee benefits, Rs. 49.31 crore towards part of the additional gratuity fund requirement and a net sum of Rs. 340.01 crore towards additional pension fund liability.

Total business grew by 35.2 per cent to Rs. 2,59,020 crore as on March 31, 2011, from Rs. 1,91,577 crore as on March 31, 2010. Deposits registered a rise of 31 per cent at Rs. 1,45,299 crore against Rs. 1,10,795 crore and advances 40.86 per cent at Rs. 1,13,791 crore against Rs. 80,782 crore. Gross NPA was Rs. 3,089.59 crore against Rs. 3,611.08 crore and the net NPA at Rs. 1,328.42 crore (Rs. 1,994.97 crore).

The net NPA ratio had come down to 1.19 per cent from 2.52 per cent and the provision coverage ratio was 70.45 per cent. The capital adequacy ratio was comfortable at 14.55 per cent as per Basel-II norms.

Mr. Narendra said the total capital funds of the bank improved to Rs. 15,255.90 crore from Rs. 11,721.20 crore due to raising of Tier-II bonds for Rs. 1,967 crore and the allotment of shares to the Union Government on a preferential basis amounting to Rs. 1,054 crore (including share premium) apart from retention of profits.

The new initiatives in the platinum jubilee year included opening of 75 branches and 75 ATMs and the adoption of 75 villages for comprehensive development.

The bank was allotted 1,273 unbanked villages out of which 781 villages had been covered already.

The bank has introduced a system for customers to send their grievances through SMS from mobile phones, besides launching interbank mobile payment service.

Pranab to attend ADB meet in Hanoi

Finance Minister Pranab Mukherjee is scheduled to attend the 44th annual meeting of the Asian Development Bank (ADB) being held in Hanoi at a time when high inflation is threatening to push millions of people in the Asia-Pacific region to extreme poverty.

Understandably, the prime focus of deliberations at the four-day ADB meeting starting May 3 will be on ways and means of tackling the runaway increase in global food and oil prices with special reference to the multilateral lending agency's recent report on how the resurgence in food and oil prices and consequent high inflation are impacting the economies of developing Asia and driving millions of rural and urban households to below poverty line.

Besides Mr. Mukherjee, French Finance Minister Christine Lagarde and her Japanese counterpart Yoshihiko Noda are also slated to participate in the deliberations with ADB President Haruhiko Kuroda and the IMF (International Monetary Fund) Deputy Managing Director Naoyuki Shinohara during the four-day meeting of the board of governors of the Manila-based multilateral institution.

Some of the other issues to be taken up for discussion are environmental degradation and climate change.

Core sector logs 7.4 % growth in March

The six core sector industries logged a reasonable growth of 7.4 per cent in March this year over the 6.8 per cent achieved in March 2010 to give ample indications that there is unlikely to be any further deceleration in overall industrial growth during the month.

Since the six infrastructure sectors — crude oil, petroleum refinery, cement, electricity, finished steel and coal — account for over a quarter (with a weight of 26.7 per cent) in the Index of Industrial Production (IIP), it may be safe to assume that industrial growth numbers in March would be higher than what was posted in February this year. Industrial growth had decelerated to 3.6 per cent in February from a healthy expansion of 15.1 per cent witnessed in the same month a year ago.

In the event, the better core sector growth data may provide some cushion to the Reserve Bank of India to go ahead with its measures to tame inflation without worrying about the impact it would have on industrial growth.

The official data shows that the core sector growth was mainly driven by crude oil and finished steel which saw robust growth rates of 12.1 per cent and 9.9 per cent, respectively, in March as compared to 3.5 per cent and 7.7 per cent in these two industries a year ago.

According to the provisional data, petroleum refinery products posted a growth of 8.5 per cent in March to mark a complete turnaround from the contraction of 1.1 per cent that was seen during the same month of 2010.

However, there was a marginal slowdown in electricity generation and cement production as the growth rates were slightly lower at 7.6 per cent and 6.5 per cent, respectively, during the month as compared to the 7.9 per cent and 7.8 per cent increase achieved by the two core segments in March 2010.

Significantly, coal production contracted by 1.2 per cent during the month whereas the sector had witnessed an increase of 8 per cent in March last year.

Full year performance

Following the better show in the last month of the fiscal year, the core sector ended 2010-11 with a slightly better performance, having posted a marginally higher growth of 5.9 per cent as compared to 5.5 per cent achieved in the previous fiscal. Crude oil output went up by 11.9 per cent (0.5 per cent), while coal output remained constant at the previous year's level of 7.9 per cent. Electricity and cement production also saw lower growth at 5.6 per cent and 4.5 per cent.. Alongside, petroleum refinery output went up by 3 per cent. . However, finished steel production rose by 8.2 per cent (5.4 per cent).

Exports jump 38 % in 2010-11

The strategy adopted by the Commerce and Industry Ministry for diversifying exports to new and untapped markets has borne fruit as exports recorded an impressive jump of 37.55 per cent to $245.86 billion during 2010-11. The target for exports is set at $300 billion for the current fiscal.

The export diversification strategy announced by the Commerce and Industry Minister, Anand Sharma, has succeeded in not only finding new markets for Indian products but has also prevented a sharp decline in labour-intensive export sectors.

According to an official statement, shipments of merchandise increased by a steep 44 per cent in March to $29.1 billion on the back of a smart recovery in the U.S. and key European markets. The strategy to diversify exports to markets like Latin America and Africa paid rich dividends.

Though imports crossed $350 billion, but they grew at a lower pace of 21.6 per cent to $350.69 billion in 2010-11 over the previous fiscal. The trade deficit of $104.82 billion was less than the earlier forecast of $120-130 billion.

For March, imports totalled $34.7 billion, up 17.27 per cent year-on-year. Mr. Sharma is scheduled to unveil a new export strategy on Tuesday aimed at raising India's exports to $450 billion in 2013-14. He could well revise the export target upwards for 2013-14. “Diversification strategy is paying off and the country is set to reap dividends in the near future.

Exports in 2011-12 would cross $300 billion and would touch $500 billion by 2014-15,” Federation of Indian Export Organisations (FIEO) President Ramu S. Deora said.

Total merchandise trade has almost touched $600 billion, half of India's gross domestic product of $1.2 trillion. The sectors which registered impressive growth during the fiscal include engineering, with exports rising by 84.7 per cent to $60 billion, followed by petroleum products at $42.5 billion (up 50.5 per cent).

Similarly, gems and jewellery exports grew 15.4 per cent to $33.5 billion, while drugs and pharmaceuticals shipments rose by 15 per cent to $10.3 billion. In March, oil imports increased by 8.2 per cent to $9.43 billion from $8.72 billion in the year-ago period. Non-oil imports grew by 21 per cent to $25.3 billion from $20.9 billion.

Trade deficit

During April-March 2010-11, oil imports went up by 167 per cent to $101.68 billion from $87.13 billion in the corresponding period last year. Non-oil imports during the last fiscal were higher by 24 per cent at $249 billion against $201.2 billion. The trade deficit stood at $104.82 billion, lower than the $109.62 billion deficit in the previous year.

Allahabad Bank is planning to go in for a medium term note (MTN) issue of around $500 million which would be listed on the Singapore Exchange. The issue is likely to be made within this fiscal. A senior bank official said that the instrument would have a tenure of about five years and would help raise long-term funds for meeting the bank's capital needs for setting up overseas branches.

The bank, which closed 2010-11 with a 17.9 per cent increase in net profit and a 26 per cent increase in total business, is looking at overseas expansion with branches in Shanghai, Kowloon, Singapore and Dhaka. Necessary approvals have been sought from the Reserve Bank of India, the official said.

At a meeting to announce the results, Chairman and Managing Director J. P. Dua, said that while total business increased to Rs.2,26,458 crore, the net profit rose to Rs.1,423 crore during the year ended March 31, 2011. Net interest margin increased to 3.4 per cent from 2.5 per cent.

The bank has recommended a dividend of Rs. 6 per share for 2010-11.

BEML bags Rs. 925-crore Delhi Metro order

BEML, manufactures metro rail cars, has bagged an order worth about Rs.925 crore from Delhi Metro Rail Corporation Limited (DMRCL) for the supply of 136 intermediate metro cars. BEML is to execute the order from October 2012 and complete it by December 2013, according to release issued by the company. This would enable the DMRCL to convert existing four-car train sets to six car sets. — Special Correspondent

Subhinder Singh Prem, currently Managing Director of Reebok India, has been appointed Managing Director of adidas group India and will take over the responsibility for overall business in India with effect from May 1.According to a release, Mr. Subhinder Singh Prem held various positions within Reebok India, including Executive Director of sales and marketing.

New MD for Adobe's South Asian operations

Adobe Systems has appointed Umang Bedi as Managing Director, Sales and Marketing, for South Asia. According to a release, Mr. Umang will lead Adobe's sales and marketing operations for India and SAARC. He managed leadership roles at Symantec, Sun Microsystems and Wipro.

The Adani Group-owned Mundra Port and Special Economic Zone Ltd (MPSEZL) on Tuesday announced $2 billion acquisition, on lease of 99 years, of Abbot Point Port in Queensland, Australia, marking the beginning of company's business expansion outside India.

Talking to media persons here, chief financial officer of MPSEZL B Ravi said that the size of balance sheet of the company would be doubled after the acquisition.

"We have acquired 100 per cent stake in Abbot Point Port," he said.

"This an all cash deal duly funded by an acquisition debt. The assets base at Abbot Port allows us to have a take out finance at the assets level very soon," Ravi said.

The deal was signed in Brisbane, Australia between the company officials and the Queensland government this morning, he said, adding that they have also intimated the Bombay Stock Exchange (BSE) about the new development as per rules.

The port known as Abbot Point X50 Coal Terminal (APCT), was mostly coal export port in Queensland and is owned by North Queensland Bulk Port Corporation Limited (NQBP).

"The sale of ACPT is through 99-year-lease of existing coal terminal facilities and associated infrastructure. It presently has two berths capable of handling cape-size vessel of over two lakh tonnes dead weight with annual installed capacity to load 50 million tonnes," Ravi said, adding that takeover would be complete by June 1.

A determined Reserve Bank of India (RBI) on Tuesday hiked the short-term indicative policy rate (repo rate) by 50 basis points from 6.75 per cent to 7.25 per cent to tame soaring inflation while increasing the savings bank rate to 4 per cent from 3.5 per cent.

The regulated savings bank rate was remaining at 3.5 per cent since April 2003. With the hike in repo rate, the rate at which banks borrow from the central bank, home auto and other loans would be costlier for customers.

“There will henceforth be only one independently varying policy rate, and that will be the repo rate. This transition to a single independently varying policy rate is expected to more accurately signal the monetary policy stance,” said RBI Governor D. Subbarao while announcing the Annual Monetary Policy.

“Higher inflation will persist, and may indeed get worse,” said Dr. Subbarao.

“Headline and core inflation have significantly overshot even the most pessimistic projections over the past few months. This raises concerns about inflation expectations becoming unhinged.........Over the long run, high inflation is inimical to sustained growth as it harms investment by creating uncertainty. Current elevated rates of inflation pose significant risks to future growth. Bringing them down, therefore, even at the cost of some growth in the short-run, should take precedence,” Dr. Subbarao added.

As per the new operating procedure, the reverse repo rate, determined with a 100 basis point spread below the repo rate, will stand adjusted at 6.25 per cent. The Marginal Standing Facility (MSF) rate, determined with a spread of 100 basis points above the repo rate, gets calibrated at 8.25 per cent. However, the Bank Rate remains unchanged at 6 per cent and the cash reserve ratio (CRR) at 6 per cent.

The RBI Governor said that high oil and other commodity prices and the impact of the Reserve Bank's anti-inflationary monetary stance would moderate growth. Based on the assumption of a normal monsoon, and crude oil prices averaging $110 a barrel over the full year 2011-12, RBI projected the real GDP growth for 2011-12, for policy purposes, at around 8 per cent as compared to an estimated growth of 8.6 per cent last year.

Keeping in view the domestic demand-supply balance, the global trend in commodity prices, and the likely demand scenario, the RBI projection for WPI inflation for March 2012 is 6 per cent with an upward bias.

“Inflation is expected to remain at an elevated level in the first-half of the year, before gradually moderating to 6 per cent by March 2012,” said Dr. Subbarao.

“High and persistent inflation undermines growth by creating uncertainty for investors, and driving up inflation expectations. An environment of price stability is a pre-condition for sustaining growth in the medium-term. Reining in inflation should therefore take precedence even if there are some short-term costs by way of lower growth”.

Further, the RBI Governor said “We will be instituting a new Marginal Standing Facility (MSF)”. Banks can borrow overnight from the MSF up to one per cent of their respective net demand and time liabilities. The rate of interest on amounts accessed from this facility will be 100 basis points above the repo rate. The MSF will come into effect from the fortnight beginning May 7. Dr. Subbarao said that it had broadly accepted the framework of regulations for Micro Finance Institutions (MFIs) recommended by the Malegam Committee. Bank loans to all MFIs, including NBFCs working as MFIs on or after April 1, 2011, will be eligible for classification as priority sector loans if, and only if, they conform to the regulations formulated by the Reserve Bank.

As recommended by the Malegam Committee, the Reserve Bank has also decided to appoint a Committee to review the priority sector lending classification.

Dr. Subbarao also said that a broad goal driving RBI's financial inclusion initiative was to provide banking access to all villages with population of over 2,000 by March 2012. There are 72,800 villages identified as falling into this category. “We are asking banks to ensure that at least 25 per cent of the new branches being opened during this year are located in Tier-5 and Tier-6 centres”.

In the area of financial markets, there are three important initiatives. The RBI will shortly issue the final guidelines on credit default swaps. Second, the period of short sale in government securities will be extended from the existing five days to a maximum of three months. Third, FIIs will be allowed to cancel and rebook up to 10 per cent of the market value of the portfolio as at the beginning of the financial year.

Moving on to regulatory measures for commercial banks, the RBI Governor highlighted two measures. First, the provisioning requirements on certain categories of non-performing advances and restructured advances will be enhanced. Second, investment by banks in liquid schemes of debt-oriented mutual funds will be subject to a prudential cap of 10 per cent of their net worth as on March 31 of the previous year.

In a clear indication that the government's current primary concern is to douse inflationary expectations even at the expense of a slight moderation in growth, Finance Minister Pranab Mukherjee on Tuesday came out in support of the Reserve Bank's hawkish and aggressive monetary policy stance saying that the higher-than-expected hike in key lending and borrowing rates was an essential move to tame inflation.

In its bid to impact the cost of funds and thereby dampen credit offtake without any time lag, the apex bank raised the short-term lending (repo) rate by 50 basis points to 7.25 per cent and took a policy decision to let the borrowing (reverse repo) rate automatically float in tandem at 6.25 per cent keeping the one percentage point corridor intact which effectively also means a hike of 50 basis points. Alongside, the RBI also raised the savings account deposit rate to 4 per cent from 3.5 per cent with immediate effect as a measure of compensation to depositors from high inflation.

Commenting on RBI's annual monetary policy action for 2011-12, Mr. Mukherjee said: “This [rate hike] was necessary to contain inflation. Inflationary pressure in the economy is still very high”. Supporting the apex bank's aggressive monetary policy stance, he said it was required “to contain inflation in the context of the volatility of commodity prices, including energy prices and food prices in the international market”. Mr. Mukherjee was also in agreement with RBI Governor D. Subbarao that apart from the growth-inflation trade-off, the country's GDP (gross domestic product) growth during the current fiscal — pegged lower at 8 per cent by RBI — would also be impacted by international commodity prices and the monsoon rains this year. “It [economic growth] would depend upon the energy prices and on the behaviour of good monsoon....we are hoping that there will be good monsoon,” he said.

Planning Commission Deputy Chairman Montek Singh Ahluwalia also lauded the RBI's hawkish stance on containing inflation. “Both [raising key and saving interest rates] are very good decisions. All over the world, the resurgence of inflation is a matter of concern…When inflation goes up, it is sensible to take steps early to contain inflation. I am very glad that RBI has given a clear signal going beyond the usual 25 basis point [revision] to something more substantial”. Mr. Ahluwalia also disagreed with the industry's apprehension that an increase in short-term interest rates would hamper economic growth.