Buyout creates largest foreign bank in India
Big thrust for money market reforms
All-round applause for Jalan
More knots appear in Sankhya Vahini project
Reserves of UTI soar to Rs 9202 crore
WTO consensus panel sought
New CII chief
Hindalco net at Rs 612 crore

Mumbai, April 27 
Standard Chartered Bank’s acquisition of ANZ Grindlays operations in the Middle East and South Asia will lead to the creation of the single largest foreign bank in India with assets of over Rs 21,000 crore, retail banking clients of over 700,000, and a huge credit card customer base.

Stanchart officials revealed that Grindlays will feature in the new name of the merged entity because of the tremendous brand equity it enjoys in the country. Grindlays, a former British colonial bank that was set up in 1850, has very strong links with Calcutta where it set up its first branch in 1854.

The main offices of the bank — an imposing colonial structure — was set up on Clive Row (now Netaji Subhash Road) in 1863 and the logo of the prancing elephant was an enduring symbol of solidity and old-style British values. Even after the merger with ANZ Corporation in the late eighties, it continued to sport the Grindlays name in its India operations because of the strong values that the brand represented.

The two banks in India will now set up five integration task force teams to facilitate a smooth transition. The teams will be country specific and will cover five key sectors — information technology and finance, infrastructure and finance, corporate banking and treasury and consumer banking and retail banking and credit card division and human resources & communications.

A top official at Standard Chartered bank said the strength of the teams will be decided shortly. Bank officials were cagey when asked to speculate on who would be picked to head the operations in India.

“A decision will be taken in the due course of time,” they said. The chief executive of Standard Chartered Bank’s operations in India is John Filmeridis, while Anuroop (Tony Singh) heads ANZ Grindlays operations in India.

Standard Chartered has 19 branches spread across nine cities in the country while ANZ Grindlays has a wider coverage with 39 branches in 15 cities.

Officials refused to be drawn into a discussion on possible redundancies as a result of the merger. “We see a lot of opportunities. Everything will fall in place once the teams come out with their suggestions,” a spokesman for Standard Charted Bank said.

Standard Chartered has stated that good economic growth rates are forecast in India and across the region and it reckons that this is the right time to invest. “This is an excellent opportunity to acquire a well-managed, quality business at the right price. It will position us to take advantage as the region, with its rapidly growing middle class, opens up to e-commerce and new banking products,” the official said.

There is a potential wrinkle in the fabric because of the huge unresolved liability of over Rs 900 crore arising from the infamous securities scandal involving disgraced stockbroker Harshad Mehta that dates back to 1992.

The case is still being fought in the courts and today’s agreement carries a clause that obligates ANZ to provide Standard Chartered Bank with indemnities on credit matters and litigation including the NHB matter.    

Mumbai, April 27 
Bimal Jalan turned on the levers of liquidity to pump in more money for those who need it, but was tight-fisted enough to ensure that his lean-season credit policy does not spew out the volume of cash that could turn an inflationary under-current into a roaring tide.

The millennium’s first credit policy carries the financial sector reforms a yard forward and relaxes several controls. As the first thing, the minimum CRR balances that banks must maintain has been reduced to 65 per cent from 85 per cent of their total liabilities. This means more money can be used for lending.

The policy attempts to widen the scope of prudential norms. A key step in this direction is that banks have been advised to voluntarily incorporate the ‘risk weighted components’ of subsidiaries into their own balance-sheets. This will prevent the possibility of damages to net worth when they switch over to an unified balance sheet after some time.

An announcement of far-reaching consequences was that banks keen on entering insurance business can hold more than 50 per cent initially, albeit on a highly selective basis.

On the lending side, the restriction that project loans must be given at fixed interest rates has been removed. Banks can now extend all kinds of loans at fixed and floating rates. They are also free to offer differential rates of interests on NRE deposits, and to lend gold mobilised under the Gold Deposit Scheme to other nominated banks.

Financial institutions — not the ones always at the centre of a credit policy and governors’ minds — had a lot to cheer about. In moves that will make it as easy for them to raise deposits as banks, Jalan gave them the freedom to fix rates on their term deposits. Earlier, they could not offer rates more than State Bank of India.

Much of the policy was devoted to the money market, ways to provide greater liquidity support, and to usher in more players. A full-fledged liquidity adjustment facility will be put in place gradually, and the interest on these loans tied to the ruling repo rate.

This will confine money market rates to a ‘corridor’, impart greater stability and, thus, facilitate the emergence of a short-term rupee yield curve. The export credit refinance will continue for some time more.

Non-bank entities, including mutual funds which hold both current and subsidiary general ledger accounts with RBI, have been allowed to borrow and lend in the repo market.

A debt securities clearing corporation is planned, which will keep repos involving bonds of PSUs and FIs in dematerialised form.

Talking to reporters after the presentation, Jalan said the policy seeks to ensure that all legitimate requirements for bank credit are met while guarding against any buildup of inflationary pressures created due to cash-induced excess demand.

“The RBI will continue its policy liquidity management through open market operations, including two way sale/purchase of treasury bills and through the reductions in cash reserve ratio as and when required,” the RBI governor said.

He said the domestic interest rates were now closer to the international trends.    

April 27 
The accolades for the monetary and credit policy unveiled by the Reserve Bank of India (RBI) have been streaming in from all quarters. While the government and most sections of the industry have welcomed it stating that the measures are in line with the reforms process, bankers and FIs are equally upbeat.

Finance minister Yashwant Sinha told newspersons that it is a well drafted policy and the advice and caution entailed in it is welcome. He said the borrowing programme of the Centre is unlikely to put pressure on interest rates as the central bank had already brought down the bank rates and the cash reserve ratio (CRR). Further, he said that fiscal deficit should be brought under control.

President of the Federation of Indian Chambers of Commerce and Industry (Ficci), G.P Goenka said the policy had a number of redeeming features which are directed to give a critical push to various sectors, including agriculture, small scale industry, credit delivery mechanism and micro-credit.

CII president Rahul Bajaj said the decision to reduce the minimum maturity of certificates of deposits (CDs) to 15 days to bring it on par with other instruments and the move towards a pure interbank call/notice money market and modified guidelines for the issue of commercial paper would ensure stronger and deeper money markets.

The Associated Chamber of Commerce (Assocham), while welcoming the credit policy felt that the RBI should have considered a further reduction in both the CRR as well as the bank rate. Shekhar Bajaj, president of Assocham, said due to the favourable macro-economic environment, RBI was able to meet the large market borrowing requirement of the government without too much stress and without pressure on interest rates.

Further, Ravi Todi, president, Merchant’s Chamber of Commerce and K. K. Bangur, president, Indian Chamber of Commerce, also welcomed the policy initiatives.

The monetary and credit policy was also well received by bankers.V. S. Srinivasan, managing director, Centurion Bank said there is a clear indication that the RBI is concerned about the possible tightening up of interest rates due to the government’s borrowing programme, inflation increase and impact of the drought on agriculture. Kalpana Morparia, senior general manager, ICICI Ltd, said with the interest rate restriction now removed, financial institutions can now concentrate on the fixed deposit market. Earlier, the exposure of FIs to the retail public was constrained by frequent bond offerings.

Meanwhile, call rates ended mildly lower at the overnight call money market, reacting slightly favourably to the monetary and credit policy today. Call rates closed around 6.90-7 per cent, lower from Wednesday’s closing levels of 7-7.10 per cent after opening on a relatively firm note around 7-7.05 per cent.    

New Delhi, April 27 
The government has admitted it knew little about IUNET before it chose the company as a partner in the now-controversial Sankhya Vahini project, the high-speed data network bandied around as the best way to end the country’s poverty of numbers.

It told Parliament that the Indian Embassy in Washington had sent a Dun and Bradstreet report which says the company was floated only last year, just two people work for it, and that little is known about its two US-based directors, Paul Christanio as the CEO and Jeffery W. Bolton as the secretary.

More important, Vallampadugai Arunachalam and Raja Reddy, supposed to be leading the project, do not figure among the directors, according to a report filed on April 27. The report was sought to verify the claim by the two persons that they were president and CEO of the company. On the contrary, the public relations agency which arranged the media conference for Arunachalam refrained from referring to him as the CEO of IUNET today. Instead, it chose to call him as a ‘distinguished services professor at the Carnegie Mellon University’.

Sources in the ministry of communications said they had asked Arunachalam to explain the technical aspects of the project, and to dispel doubts about the bonafides of IUNET.

He said Sankhya vahini was conceived by the Narasimha Rao government in 1995, and was followed up the Deve Gowda coalition in 1997. More pertinent was his claim that he was the IUNET CEO while Reddy was the president.

“I was asked by Deve Gowda to make a presentation to finance minister P. Chidambaram, who, in turn, asked me to do the same before the Telecom Commission. We have since made presentations to Jaswant Singh, chairman of the IT task force and Andhra chief minister Chandrababu Naidu,” Arunachalam said.

Refuting charges that the project was mired in shady dealings and that the credentials of people involved were suspect, he brushed off the absence of tendering, saying it was not required because Sankhya Vahini will largely meet educational needs.

“We had signed a memorandum of understanding with the department of electronics (DoE) on July 6 1999 and the Cabinet cleared the proposal on January 9 this year,” he said.    

Mumbai, April 27 
The Unit Trust of India (UTI) today declared that its reserves and surplus have risen to Rs 9202 crore for the nine months ending March 31, 2000 from Rs 1492 crore as on June 30, 1999.

Net income for the nine months at Rs 8991 crore reflected an increase of 49% over the net income for six months up to December 1999 (Rs 6046 crore).

The Trust’s sales under all schemes crossed Rs 10,000 crore as on March 31. Net sales were Rs 2491 crore for the period under review as compared with negative sales of Rs 3349 crore in the corresponding period of previous year.

An upbeat UTI chairman P.S. Subramanyam, said, “A major part of the net income is from the sale of securities booked during the quarter and the first nine months of the year. UTI has been successful in encashing the market boom before the current volatility surfaced.”

“Reserves and surplus, as on March 31, have risen to Rs 9202 crore from Rs 1492 crore as on June 30, 1999, an increase of 517 per cent over the last nine months with US 64 accounting for 46 per cent of the reserves.”

The equity portfolios of almost all schemes showed a good appreciation on the books,” he added.

US-64 was the star performer with a massive increase in net income and reserves in the last quarter. US-64 earned a net income of Rs 738 crore during the quarter ended March 31.    

New Delhi, April 27 
Director-General designate of the World Trade Organisation, Supachai Panitchpakdi today called for setting up an executive committee in the WTO for evolving greater consensus among member nations.

“We need to formulate an executive committee or an advisory committee similar to the ones in organisations like the World Bank or the International Monetary Fund, with representatives from member countries. It will be very difficult for the WTO to obtain a consensus on every issue from 130 different countries, a figure which will soon expand to around 170 countries. So a system has to be put in place whereby a committee can take these decisions on behalf of the member countries. This will help in strengthening the WTO,” Supachai, who is also the commerce minister of Thailand, said at the annual session of the Confederation of Indian Industry (CII).

Highlighting some of the key issues before the WTO, Supachai called for greater sacrifices by advanced countries for the benefit of developing countries.

Preferring to call the new round of negotiations in the WTO as the “developing round,” Supachai said the key issues lost in the last round should be redressed.

Among the other things that the new round would discuss are more concessions on textile trade and the inclusion of anti-dumping procedures. “We hope to set up a framework to change the image of WTO — a more transparent organisation that caters to all,” Supachai added.

Earlier, speaking at the CII seminar on “Balancing the new economy and the old economy,” Karnataka chief minister S.M. Krishna suggested greater decentralisation of funds allocated to state governments.

“States should have the freedom to decide where they would like to invest money allocated to them by the Centre. For example, instead of spending government funds on subsidies, I would rather use that money on education and infrastructure,” Krishna said.    

New Delhi, April 27 
Arun Bharat Ram, vice-chairman and senior managing director of SRF Ltd today took over as president of the Confederation of Indian Industry (CII) from Rahul Bajaj for the year 2000-01.

Sanjiv Goenka, vice-chairman of RPG Enterprises took over as the chamber’s vice-president and will eventually take over as president for the year 2001-02. Goenka is the youngest vice-president ever elected by CII.    

Mumbai, April 27 
Hindalco Industries Ltd has posted a 8 per cent rise in net profits for the financial year ending March 31, 2000. Net profits rose to Rs 612 crore against Rs 567 crore in the previous year.

The growth in net profit was lower as the company wrote off Rs 23 crore which it had spent on its initial plan to set up a greenfield aluminium complex at Orissa. The project was shelved earlier this fiscal. Without adjusting for this write-off, the profit before tax stood at Rs 635 crore against Rs 567 crore, showing a rise of 12 per cent.

During the year, Hindalco’s sales stood at Rs 2031 crore, which is a 15 per cent rise over Rs 1767 crore in the previous year. The company said that its performance has been good and that three factors have played a major role in this front. These include optimising capacities, strengthening of operating efficiencies, and aggressive and innovative marketing strategies.

The board of directors recommended a final dividend of Rs 3 per share. During the year, a millennium dividend of Rs 5 per share was declared.

Hind Lever Chemicals Ltd (HLCL) has reported an increase of 17 per cent in its turnover to Rs 236.6 crore for the first quarter ended March 31, 2000 from Rs 202.4 crore in the previous corresponding period.

Profit after tax increased to Rs 8.2 crore (Rs 4.3 crore). Interest expenditure at Rs 4.9 crore is higher during the current quarter due to high amounts of price concessions pending with and receivable from the government.

Reckitt and Colman has posted an impressive growth in net sales and profit before tax by 24.4 per cent and 30.7 per cent respectively in the first quarter ending March 31, 2000. While net sales stood at Rs 13.63 crore, the profit before tax was Rs 9.78 crore.    


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