State Bank hikes rates on deposits
Institutions set to take control of Mesco
UBI plans to axe 11.5% staff
Fiat puts India plan into top gear, eyes insurance
Vodafone to quit RPG Cellcom
Foreign Exchange, Bullion, Stock Indices

Mumbai, Sept 11: 
The State Bank of India (SBI) today raised its interest rates on deposits by 50 to 75 basis points on various maturities. In another significant development, leading financial institution ICICI increased its lending rate by 50 basis points on short, medium and long-term advances.

State Bank had pegged its prime lending rate (PLR) at 12 per cent in a 75 basis-point increase last month. ICICI said the higher rates were justified by what it called ‘the volatility in interest rates’ after the Reserve Bank’s cash-soaking measures, which included a rise in the cash reserve ratio (CRR) and Bank Rate.

“Interest rates have gone up across the maturity spectrum, along with an increase in borrowing costs,” an ICICI release said here today. The financial institution has increased its short-term prime rate (STPR), medium term prime rate (MTPR) and long-term prime rate (LTPR) to 13 per cent, raising expectations that other FIs like Industrial Development Bank of India (IDBI) and the IFCI will move to realign their rates soon.

SBI, on the other hand, will offer 6.25 per cent on deposits of 46-179 days (below Rs 15 lakh), up 0.75 per cent. Deposits of Rs 15 lakh to Rs 1 crore, with the same maturity profile, will now fetch 6.75 per cent compared with 6 per cent earlier.

The rate on deposits of 1 year to less than 2 years has been raised to 9 per cent from 8.50 per cent; the rate will be 9.5 per cent (9 per cent earlier) on deposits of 2 years to less than 3 years, and 10.5 per cent (10 per cent) on deposits of 3 years and above. For term deposits of Rs 1 crore and above, kept for 46 days to 179 days, the rate has been increased to 7 per cent (6.25 per cent).

The rate will be 9.25 per cent (8.50 per cent) in the case of deposits of 1 year to less than 2 years, 9.75 per cent (9 per cent) for deposits of 2 years to less than 3 years, and 10.75 per cent (10 per cent) for deposits of 3 years and above.

In August, SBI had matched its lending rate with that of other leading banks such as Bank of Baroda (BoB) and Corporation Bank, which had raised their PLRs by 75 basis points and 50 basis points respectively, to peg it at 12 per cent.

The measures taken by the RBI on July 21 was primarily aimed at raising short-term interest rates, as part of its efforts to shore up a battered rupee.    

New Delhi, Sept 11: 
Industrial Development Bank of India (IDBI) and other financial institutions, which have lent heavily to the controversy-ridden Mesco group, today requested the steel ministry to depute a professional director from Steel Authority of India Ltd (SAIL) to take charge at Mid East Steel.

The request was made during a meeting of the FIs with steel minister B.K. Tripathi where Mesco group chairman J.K. Singh made a written plea, asking IDBI to nominate a chief executive officer (CEO for his steel project.

The promoters of new steel projects, such as Ispat, Vijaynagar and Mesco, and top bureaucrats from finance, steel and commerce ministries were also present at the meeting.

The IDBI representatives present at the meeting requested the steel minister to depute a top manager from Steel Authority of India Ltd to handle Mid East’s turnaround.

This move virtually gives FIs total control over the project, sources present at the meeting said.

Mid East Integrated Steel plans to set up a 6 lakh tonne pig iron plant. The project cost has now shot up to Rs 662 crore from the initial estimate of Rs 307 crore.

At today’s meeting, FIs, which included State Bank of India, IFCI and ICICI besides IDBI, stressed the ned for promoters to pump in more equity into their steel projects.    

Calcutta, Sept 11: 
The city-based United Bank of India (UBI) has proposed to axe 2450 employees or 11.5 per cent of its 21,316-strong workforce this year through a voluntary retirement scheme.

The proposal forms part of a business restructuring proposal for the period 2000-01 to 2003-04 that provides for two scenarios — one with a VRS and the other without.

The bank management, which has been battling to find a way to cover up the gaping hole in its balancesheet created by its accumulated losses of Rs 1378 crore, is however not in favour of offering a VRS to its employees unless it is compelled by circumstances to do so. The bank feels that there is a risk of losing a larger proportion of performing employees creating imbalances that would require time to be filled through fresh recruitments.

The restructuring plan also envisages the infusion of additional capital of Rs 300 crore. Of this, a sum of Rs 200 crore will be utilised for the maintenance of requisite capital adequacy ratio (CAR) and Rs 100 crore will go towards expenditure for technology upgradation plan during 2000-01.

The bank has also sought interest free loans of Rs 135 crore to finance the implementation of the technology upgradation plan and Rs 214 crore for the VRS.

The plan envisages repayment of NPA accounts amounting to Rs 72 crore guaranteed by central/state governments. It seeks Central government and RBI permission for closure/merger/ relocation of non-viable branches in rural/semi-urban areas and for opening branches in other potential areas. It also seeks their clearance for need-based recruitment at a later stage.

The business plan has been presented under two scenarios - one considering attrition of manpower through normal retirement process (without VRS) and other considering additional attrition of manpower through the implementation of VRS with interest-free loans.

A comparative study of both the scenarios show that there is a steady rise in operating/net profit over the plan period under scenario I and operating/net loss in the first year of the plan and thereafter steady increase in operating/net profit in scenario II.

In scenario 1, the CAR will reach a reasonable level of 12.1 per cent in 2000-01, 11.2 per cent and 10.8 per cent in 2001-02 and 2002-03 and stabilise at 10.8 per cent thereafter.

In scenario II, the CAR will be lower at 9.1 per cent in 2000-01 and 2001-02, 9.4 per cent in 2002-03 and 9.9 per cent in 2003-04.

Given the current age profile of the employees, the workforce will be reduced by about 1500 employees through a normal course of retirement and another 300 through other forms of attrition over the next four years. Reduction by this process will obviate the expenditure of Rs 214 crore on VRS and the possibility of suffering a net loss in the first year of implementation of the restructuring plan.

“Taking an overall view of both the scenarios, the plan under scenario I is found to be more amenable for achieving sustained viability in a cost effective manner,” the plan says.

The bank has also worked out an action plan to achieve the targeted financial parameters. To ratchet up deposits, the bank has recommended a continued thrust on deposit mobilisation .

The bank has said that for greater credit outflow emphasis should be given on trade loans and retail credit such as housing finance, consumer durable loan, car loan, educational loan and personal loan.

For recovery of bad loans, the bank has prescribed that more cases should be placed before the settlement advisory committees at the levels of head office and other controlling offices. The bank has envisaged a gradual reduction of gross NPAs from Rs 1465 crore on March 31, 2000 to Rs 1055 crore by March 2004.    

Sariska (Rajasthan) Sept 11: 
Fiat SPA of Italy may foray into the insurance, information technology and aeroplane engines sector in India. It plans to invest $ 330 million equity into its joint venture with Premier Automobile Ltd — Fiat India Ltd.

The proposed investments would expand its automobile operations and introduce new products in India. It may result in Fiat buying out the stake of PAL in the venture. PAL currently holds less than 5 per cent stake in the company.

Launching the station wagon model-Siena Weekend here, Giovanni Ravina, Fiat India managing director, said, “If we bring fresh equity, PAL’s stake would be diluted further.”

Fiat group is closely monitoring the domestic information technology, aeronautics and insurance sectors. Speaking to The Telegraph, Pietro Valfre’di Bonzo, chief corporate representative of Fiat International in India, said, “The insurance sector will soon open up which will provide greater opportunities. Initially we will consider venturing into the vehicle insurance sector. We may then move to general and life insurance in the second phase.”

Fiat would enter the domestic insurance sector through its company ‘Toro Assicurazioni’, he added. When the aeronautical sectors opens up, Fiat will foray into the sector through Fiat Avio, which produces supersonic jet engines. In India, the company is planning to set up an engine maintenance base, along the lines of a similar centre in China.

Bonzo said, “We are studying the market for the aircraft engine maintenance centre in India. We are looking at our core competencies. A final decision on the aviation venture will be announced soon.”

The company plans to enter the information technology sector in India through its existing infotech arms Comau and Magneti Marelli, said Richard Gadeselli, head of Corporate Affairs, Fiat UK Ltd. Both Comau and Magneti Marelli are already operating in India.

Fiat Auto earlier announced an investment of $ 400 million in the Kurla plant and an additional $ 150 million in Ranjangaon.

Siena Weekend will be available both in petrol and diesel versions. Fiat Siena 1.6 Petrol ELX PS will be available for Rs. 7.39 lakh (ex-showroom Calcutta) while Fiat Siena 1.7 Diesel ELX PS will be available for Rs 7.91 lakh (ex-showroom Calcutta) said Ravina.

From Our Correspondent New Ikon model

Ford India today introduced a new variant of its model Ikon Sxi targeted at the young. The Ford Ikon Sxi would be available for Rs.6.99 lakh (ex show room Calcutta). The car comes with additional features like new bumpers with integrated fog lamps, chrome mesh grille, sparkle clear headlamps.    

Calcutta, Sept 11: 
Vodafone Airtouch is in talks with BPL Telecom, Hutchison Max and Birla-Tata-At&T to sell its 49 per cent stake in RPG Cellcom, a mobile-service provider in Madhya Pradesh.

The British telecom giant decided to sell its way out of the cellular venture after its local joint venture partner, the RPG group, decided to divest its 51 per cent stake in the company.

A senior official confirmed the development, and said the transfer of ownership is expected to be completed in the next couple of weeks. He said the enterprise value of RPG Cellcom is estimated at $ 100 million, which includes a debt of $ 23 million.

According to the official, the three prospective buyers have shown interest in picking up a 100 per cent stake in the company. “In fact, this is the reason why it is taking sometime to wrap up the deal,” he added.

Before Vodafone made up its mind to quit the venture, the three companies had pitched in to pick up the RPG stake in the company. They are now re-assessing their plans in a situation which has changed dramatically after the British major decided that it would end the equity alliance.

“We have decided to sell out our stake in the RPG Cellcom because we do not have a geographical advantage in Madhya Pradesh. However, we will definitely continue to be a strong player in Chennai,” the official said.

Vodafone, which holds a 22 per cent stake in RPG Cellular Services (RCS), the cellular service provider in the Chennai circle, intends to reorganise its operations in India, he said.

On its part, the RPG group is also weighing options to divest part of its RCS holding. Sources said the group, which holds a 68.5 per cent stake in the company, is considering an equity dilution up to 17.5 per cent.

which could go to the extent of cutting its stake below the threshold 51 per cent.

An RPG spokesman said the group might offload a part of its equity stake in RPG Cellular Services, but it would ensure that the reigns of management remain firmly in its hands.

“After the valuation is completed, the company will appoint a merchant banker to scout for a suitable partner,” the sources said. They said several companies had evinced interest in RCS., lured by what they called a ‘tremendous’ performance.

“The company is already making a profit of Rs 1.5 crore every month before depreciation, which is very encouraging,” they said. It has expanded its capacity to handle 75,000 subscribers, up from 25,000, at an investment of Rs 40 crore.

“However, this is not enough given our brisk growth rate. We are connecting 4,000 subscribers every month,” the sources said. The company is also planning to invest Rs 25 crore to expand its capacity further, to 1.1 lakh subscribers.

“We are hopeful that by the end of this financial year, the company will complete its second phase of expansion,” an RPG official said. The company also has plans to offer Web-enabled services very soon.

“We are trying to offer the best and modern services to our customers with the help of internet,” he said.

The RPG official has said the company has no plans to tap the capital market at the moment.    


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