Rupee hits new low of 44.07
Sensex slumps 120 pts
Banks may be armed to enforce mortgage
Big bang recipe for divestment
Zee to invest $ 200 m in digital cable network
Maiden bank loan to fund VRS
Foreign Exchange, Bullion, Stock Indices

May 10 
The rupee tumbled to an historic low of Rs 44.05/07 against the US dollar in volatile trading today that was triggered by the State Bank of India which scooped up greenbacks to meet a sudden spike in demand from importers. The previous low of Rs 43.70 against the dollar was hit in August 1998.

The rupee depreciated by a whopping 40 paise after it had opened weak around Rs 43.68/69, just a tad short of its earlier all-time low of Rs 43.70.

Forex dealers now fear that the weakness will persist and the markets will continue to remain skittish over the next couple of days. They expect the rupee to move into a lower trading band around 44.10-44.20 per dollar over the next few days. But with a bank strike due tomorrow, the market may win some respite.

Forex dealers said that unless the RBI makes a strong statement tomorrow, the rupee will continue to rule at the same levels. “For the rupee to recover, it depends on what the RBI will do. We need a strong statement from them,” said a dealer with Credit Lyonnais.

The market was abuzz with talk that the rupee’s plunge had the tacit approval of the Reserve Bank of India which decided not to intervene in the market to prop up the currency. In the past, RBI officials have privately said the central bank would like to see the rupee drift gently downwards.

In today’s trading, hefty dollar purchases by SBI, the country’s largest commercial bank and often regarded as a surrogate for the central bank, created panic in the markets. “The market expected State Bank to sell dollars to bring some stability and prop up the rupee. Instead, the bank major did just the opposite with the central bank watching from the sidelines”.

In Delhi, finance minister Yashwant Sinha said he wasn’t worried by the fall in the rupee because the forex markets were not volatile.

“The volatility of the market is judged by the spread between the buying and selling price (of rupee). That is very narrow,” Sinha told reporters.

Stating that the rupee was the domain of the Reserve Bank of India, Sinha said any comment from his side would send the wrong signal to the market.

Following the State Bank’s aggressive stance in mopping up dollars, panicky importers scrambled to pick up greenbacks, giving a further impetus to the dollar. SBI was seen selling dollars at 43.75 levels, but it did not last for long. The selling only resulted in several banks going short in their positions. As soon as the SBI started buying dollars back at 43.75 levels in early noon trades, the Indian currency plunged below the 44-mark.

The slide started with the slump in the forward premia, forcing exporters to cancel their contracts.

The bearish trend in the spot market had a marginal impact on the forward segment when the six month forward premia on the US dollar shot up to 2.4 per cent against the yesterday’s close of 2.15 per cent.    

Mumbai, May 10 
The Bombay Stock Exchange (BSE) sensex lost 120.09 points to close at 4458.40 today after a heavy selloff in ICE scrips sparked by worries over the performance of Zee Teleflms.

The immediate cause of investors’ aversion to Zee — which bore the brunt of the clobbering — was the worse-than-expected annual results announced on Tuesday. Also, fears that the company’s fourth-quarter growth would remain flat, coupled with a slowdown in earnings for the current financial year, drove investors to dump the scrip.

The disappointment over Zee’s results was accentuated by a bearish undertone set off by Tuesday’s losses in the Nasdaq composite index and the present drought conditions in several parts of the country. There was another negative factor to reckon with as the rupee plumbed a new all-time low after days of weakness. “The selling in various ICE stocks by foreign funds was intensified with the entry of speculators, leading to the bear hammering,” a broker said.

The 30-scrip index opened marginally higher at 4593.39, dipped to the day’s low of 4449.89 before closing 120.09 points higher than Tuesday’s finish of 4578.49. The BSE-100 index also dropped by 60.67 points at 2260.94.

The start of a new account on the National Stock Exchange (NSE) did nothing to prevent the fall as operators stayed away from making fresh purchases.    

New Delhi, May 10 
The expert committee on legal reforms in the banking sector has suggested that banks and financial institutions should have the power to enforce a mortgage without recourse to the courts of law. The suggestion is one of a slew of measures to improve recovery by banks and financial institutions (FIs).

If implemented, it will remove a major impediment that has stymied the growth of a vibrant mortgage market in the country.

The committee, which submitted detailed report to finance minister Yashwant Sinha today, has however specified that such powers should be restricted to only banks and FIs and not to general lenders. A special law has to be drafted for this purpose.

The new law will ensure that despite the Transfer of Property Act 1882, mortgage by depositing title deeds in favour of banks and Fis can be done anywhere in India. These deeds can give banks and FIs the power to sell off mortgaged property without having to go to the courts.

It has also suggested amendments to the Debt Recovery Tribunal Act (DRT Act) and Indian Contracts Act.

The eight-member committee headed by noted legal expert T.R. Andhyarujina was set up in February 1999 as a follow-up to the Narasimham committee on banking reforms.

The committee has suggested a draft Securitisation bill which will deal with the transfer of financial assets, form and nature of special purpose vehicles and the issue of transferable receipts. Noted advocate Shardul S Shroff, who was also on the committee, said the new recommendations on securitisation will allow trade in mortgages. “Huge assets which have so far been frozen will be immediately released,” said Shroff. The finance minister has been talking of rationalisation of the stamp duty norms and this will lead to opening up of the debt market. “We hope that this idea will fly,” he added.

The committee has also suggested that the debt recovery tribunals should be given powers that ensure expeditious disposal of proceedings. For effective implementation of orders of the DRTs, these tribunals should be vested with power of meting out punishment for contempt.

It has suggested changing the setup of the tribunal to include a member who has expertise in project financing securitisation and new kinds of debt instruments involving high risks.

The committee has also suggested amendment to Section 28 of the Indian Contracts Act.

Sinha said the report would be studied with all seriousness, but refused to give any time-frame for its implementation. Andhyarujina said if these recommendations are implemented, banks and FIs will be able to recover their dues far more expeditiously and efficiently.

The committee has however not made any recommendation for the scrapping of the Board for Industrial and Financial Restructuring (BIFR).    

New Delhi, May 10 
The Prime Minister’s council on trade and industry has advised the government to get the selloff process in public sector units (PSUs) off the blocks with a few big-ticket disinvestment deals to send the message that it is serious about selling its stake in non-core companies, and to provide a strong aperitif for the success of larger sales planned in the future.

The report, prepared by Nusli Wadia, G.P.Goenka and Rajeev Chandrashekhar, wants the government to set a divestment target of Rs 52,000 crore, to be attained over the next two years. It says the first flush should cover companies in the service, manufacturing and trading sectors. For instance, it wants NTPC to be sold off piecemeal to raise money for new power projects.

There is also a suggestion that PSUs where the government remains the single largest, but not a majority stakeholder, should be unfettered by de-bureaucratising their boards and allowing them to function independently. “The divestment target is too ambitious , but some of the sequencing and steps suggested are certainly valuable,” officials in the Prime Minister’s Office (PMO) said.

The report has proposed a selloff strategy for the disinvestment ministry under which the government has been asked to initially retain 51 per cent in efficient PSU monopolies with high social obligations. In firms which are either efficient monopolies but have low social obligations, or are efficient and function in a competitive market with low social obligations, the government should retain a 26 per cent stake. The government should go in for management contracts in the case of inefficient PSU monopolies with high social obligations and enter into joint ventures to run those which have low social obligations.

Inefficient PSUs with high social obligations in a competitive market should be sold outright in blocks; companies with low social obligations should either be closed down or sold in blocks.

The Goenka-Wadia report wants the selloff process to begin with stronger PSUs to create an appetite foe future offerings. Before this however, it says there may be a need for mergers and acquisitions, and even winding up some companies.

To blunt political opposition to the disinvestment process, the report suggests employees should be given 10 per cent at par or at a discount to the market value. There can also be an additional IPO of up to 10 per cent to citizens in individual capacity, with a stipulation that no one can hold more than 1,000 shares.

The report is strongly critical of the way in which the money raised from disinvestment is being parked in the Consolidated Fund of India to be used for revenue expenditure.    

Mumbai, May 10 
Zee Telefilms (ZTL), having identified television cables as the primary carrier of the next-generation broadband, is planning an initial investment of $ 200 million to switch over from the existing cable system to digital fibre networks. It will pump an additional $ 100 million into its internet business — both in systems that offer access services and existing portals.

The investment plans have been spurred by its decision to provide internet through cables — a medium that has now been identified as the new engine of growth in Zee’s content and convergence game, senior officials of the company said. The strategy, closely mirroring that of US giant AT&T, would lead to the setting up of hybrid fibre co-axials (HFC) networks in the country. These networks will deliver not only TV channels, the way they do today through the analogue mode, but will also provide internet connections in the digital form.

ZTL vice-chairman and managing director Vijay Jindal told The Telegraph that apart from its plan to offer broadband through cables, Zee’s investments in the internet business would be enough to provide the facility of ‘video on demand’ to customers. This is expected to be achieved through web-casting, plans for which will be crystallised once the company gets a higher band-width. “We already have a good library of Hindi films. Combine this with our plans in web-casting, and the facility of video-on-demand would be made possible,” Zee officials said.

At present, there are four main carriers of broadband internet: cable TV, fibre optic cables, wireless and digital subscriber line (DSL). There are two ways in which internet can be delivered through the TV cable. One can either have a TV-set-top box or a cable modem which could be connected to the personal computer. Though industry circles say the nature of cable TV makes broadband more suited to homes, Zee is pursuing plans to tap the office segment as well.

The officials say Zee’s subsidiary, SitiCable, would play a pivotal role in its broadband business and other new-economy areas where internet remains the most important driver of change.

ZTL’s internet businesses are being controlled by its subsidiary E-connect India.

It also has a portal, This is a horizontal portal, which consists of various vertical portals covering a wide spectrum of items such as news, current affairs, entertainment, lifestyle, travel, sports, fashion, finance, education and information technology.    

Calcutta, May 10 
For the first time, a public sector bank is going to fund the voluntary retirement scheme (VRS) of a public sector unit.

On finance ministry’s instructions, State Bank of India will extend a term loan of Rs 209.82 crore to Hindustan Steel Construction Works Ltd (HSCL) to enable it to lay off 4000 workers.

The finance ministry has agreed to extend a comfort letter along with a standard government guarantee to SBI for the loan.

The letter assures that the government will pay up the loan as well as interest payments in the tenth year if HSCL fails to repay the term loan.

The loan comes at an interest rate of about 11 per cent and will be paid from the third year.

Confirming the move, HSCL chairman A.K. Mukherjee said SBI’s local credit committee and the central committee in Mumbai had already cleared the proposal. The executive committee of the SBI board of directors would take the final decision tommorow, he said.

HSCL sources confirmed that a second tranche of Rs 109.54 crore was being negotiated with two other public sector banks in order to fund the VRS for another 2000 workers.

The company plans to reduce the workforce from 13,000 to 7000 by offering a standrad VRS of the department of public enterprises.

While the finance ministry has turned down SBI’s demand that the central government’s standard guarantee cover be modified on at least five counts, it has agreed to give SBI a charge over the assets of HSCL along with the government, the owner of the PSU.

HSCL will also have to pay a Rs 2.23 crore upfront charge for the processing of the loan.

HSCL had ended the last financial year with a provisional loss of Rs 89 crore and accumulated losses carried forward stood at Rs 100 crore after taking into account the various waivers and benefits accorded to it under the restructuring package approved by the Union Cabinet in July last year. The actual accumulated losses were, however, in the region of Rs 1400 crore.

Mukherjee said, “The order book position for 1999-2000 is Rs 360 crore which is the the highest so far.”

HSCL is targetting a turnover of Rs 340 crore for 2000-2001.    

Foreign Exchange
US $1	Rs 44.08	HK $1	Rs 5.55*
UK £1	Rs 67.13	SW Fr 1	Rs 25.10*
Euro	Rs 40.11	Sing $1	Rs 24.95*
Yen 100	Rs 40.49	Aus $1	Rs 25.10*
*SBI TC buying rates; others are forex market closing rates


Calcutta		Bombay
Gold Std (10gm)	Rs 4460	Gold Std (10 gm)	Rs 4400
Gold 22 carat	Rs 4210	Gold 22 carat	Rs 4070
Silver bar (Kg)	Rs 7850	Silver (Kg)	Rs 7850
Silver portion	Rs 7900	Silver portion	Rs 7855

Stock Indices

Sensex	4458.40	-120.09
BSE-100	2260.94	-60.67
S&P CNX Nifty	1363.15	-15.40
Calcutta	117.81	+1.16
Skindia GDR	NA	NA

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