Big houses barred from setting up banks
Arthur Andersen acquires Ind Global
Sensex up 41 pts, tech stocks wilt
Tisco plans ferro chrome unit in Australia
Court asks ANZ to deposit Rs 1522 cr with NHB
Car makers trigger off price hikes
Foreign Exchange, Bullion, Stock Indices

Mumbai, Jan 3: 
The Reserve Bank of India (RBI) today barred large industrial houses from setting up new private banks, skewering the hopes of the three leading houses — the Tatas, the Birlas and the Reliance group — which have been eager to set up new generation private sector banks.

Unveiling its new guidelines for setting up private banks here today, the RBI said individual companies “directly or indirectly connected with large houses” could, however, invest up to a maximum of 10 per cent in the equity of new private sector banks, effectively denying them controlling interest in these ventures.

In a rare but mutually beneficial move, the three big industrial houses are likely to petition the RBI seeking some relaxations in its tough guidelines.

Sources close to these houses said the three groups, represented by group outfits like Tata Finance, Birla Global Finance and Reliance Capital Ltd, will approach the central bank seeking some relaxations and these will be presented by the Association of Leasing and Financial Services (ALFS).

The issue is likely to come up for discussion at a meeting with the central bank slated for January 16 in Delhi.

“We have an informal advisory group meeting scheduled in January 16 and the issue will be certainly raised,” said Mahesh Thakkar of ALFS. “There is no reason why major industrial houses of the country should be left out.”

A dejected S.K. Mitra of Birla Global Finance said while most of the regulations were reasonable, the exclusion of industrial houses from setting up private sector banks was disappointing. “We were certainly very keen on setting up a bank. We had the necessary expertise to do it as well. We only hope that if not in the first stage, we will be allowed by the RBI in the second stage,” Mitra added.

Senior Tata Finance officials including managing director Dilip Pendse were unavailable for comment.

Tough criteria

The guidelines also set tough criteria for non-banking finance companies (NBFCs) seeking to graduate to full-fledged commercial bank status. Under the revised norms, the initial paid-up capital for setting up a new bank has been doubled to Rs 200 crore. The initial capital will have to be raised to Rs 300 crore within three years of the start of business.

Industry mavens say that Kotak Mahindra Finance, Sundaram Finance, Cholamandalam Finance and IL&FS will be the only NBFCs to fulfil the criteria and thus become eligible to convert themselves into banks. The NBFCs which are not likely to make the grade include Tata Finance, Birla Global Finance and Reliance Capital Ltd.

A senior official of Kotak Mahindra Finance said that while it met all the criteria as stipulated by the RBI, a decision would be taken at a later stage. “We have the potential of converting into a bank since we meet all the criteria,” the official said. Kotak has a net worth of Rs 500 crore.

5-year lock-in

Under the norms, the promoters’ contribution will have to be maintained at a minimum 40 per cent of the paid-up capital on “continuous basis”, the RBI said. The initial capital, other than promoters’ contribution, could be raised through a public issue or private placement.

The RBI added that in case the promoters’ initial contribution was in excess of 40 per cent, they would have to dilute the excess stake after one year of the bank’s operation. However, the apex bank was silent on the time frame within which the promoters would have to dilute the excess stake. Promoters will have to seek the RBI’s approval if they want to divest their excess holding in phases after one year as stipulated.

The apex bank said the promoters’ contribution of 40 per cent of the initial capital would have a lock-in period of five years from date of licensing of the bank. While raising the capital to Rs 300 crore, the promoters would have to bring additional capital to ensure that their holding remains at least 40 per cent of the fresh capital, it said.

The RBI said those who had their applications pending with it to start new private banking ventures would have to apply afresh.

The non-resident Indians’ (NRI) stake in the primary equity of the bank would be restricted to 40 per cent. When the private bank’s co-promoter includes a foreign banking or finance company, including multilateral institutions, their equity participation would be restricted to 20 per cent within the overall ceiling of 40 per cent, the guidelines said.

The central bank also said the proposed private sector banks would have to maintain an arm’s length relationship with business entities of promoter group and the companies investing up to 10 per cent of equity. Both have been barred from receiving any credit facilities from the bank.

The RBI ruled that NBFCs that wish to convert themselves into banks, should not have been promoted by a large industrial house or owned/controlled by public authorities, including local, state or central governments.

12% capital norm

Stipulating that the NBFC seeking to convert itself into a bank should have capital adequacy of not less than 12 per cent and net NPAs of not more than 5 per cent, the central bank said the NBFC on conversion will have to comply with capital adequacy ratio and all other requirements such as lending to the priority sector, promoters contribution’, lock-in period for promoters’ stake, dilution of promoters stake beyond the minimum, NRI and foreign equity participation.

Further, the bank should maintain a minimum capital adequacy ratio of 10 per cent on a continuous basis from the commencement of its operations. In order to ensure a level playing field, the RBI said the new bank will have to meet a priority sector lending target of 40 per cent of the net bank credit and the new bank will be required to open 25 per cent of its branches in rural and semi-urban areas to avoid over concentration of their branches in metropolitan areas and cities.

The NBFC should have acquired a credit rating of not less than AAA rating. The RBI also ruled that after conversion, the new bank will not be allowed to set up a subsidiary or mutual fund for at least three years from the date of commencement of business.

The central bank later said that it may issue licenses to “two or three of the best acceptable proposals including those from NBFCs in the next three years.”

It added that preference would be given to promoters with the expertise in priority sector and those specialised in setting up institutes to finance rural and agro-based industries.

The RBI had issued initial guidelines for private sector banks in January 1993 and later granted licences to 10 banks.


Mumbai, Jan 3: 
Arthur Andersen announced today that it has acquired the corporate finance business of Ind Global Financial Trust. This move will help strengthen Arthur Andersen’s presence in the mergers and acquisition business in the country.

The acquisition underlines Arthur Andersen’s commitment to expanding its corporate finance capabilities in India and further reinforce its position as one of the leading players in the investment banking arena.

“The synergies flowing from this acquisition will enable us to offer services for all capital market related transactions, including public offerings, open offers and share buybacks,” stated Munesh Khanna, country head, corporate finance, Arthur Andersen, India.

Ind Global Finance over the years has handled over a 100 transactions covering the entire gamut of corporate finance services. Its important clients have been the Murugappa group, HDFC group, Electrolux, Canada Life and Scroeders amongst others.

Commenting on the development, R Sankaran of Ind Global said: “The global reach (of Arthur Andersen) and diverse capabilities will create a platform for delivering high quality corporate finance services.”

The investment banking arm of Arthur Andersen — corporate finance practice — provides a wide array of services such as mergers, acquisitions, divestitures, restructuring, initial public offerings, financing.

With world-class skills in assurance, tax, consulting and corporate finance, Arthur Andersen has more than 77,000 people in more than 80 countries who are united by a single worldwide operating structure that fosters inventiveness, knowledge sharing and a focus on client success.

Ind Global was promoted by R Sankaran in 1990. Sankaran will head the new division at Arthur Andersen. In a report, The Financial News, a leading international publication for investment banking, funds and securities rated Arthur Andersen as the leading advisor for mergers.


Mumbai, Jan 3: 
The new economy stocks showed a weak trend on fresh selling on the Bombay Stock Exchange following a sharp setback as the Nasdaq Composite Index tumbled by 178.66 points last night on concerns about profits and the slowdown of the US economy.

The counters of Infosys Technology and Mahanagar Telephone Nigam Ltd were in the limelight today. Infosys dropped by Rs 97.55 to Rs 5,624.60. MTNL’s stocks rose as the news about its listing at the New York Stock Exchange in the next 10 days hit the market. The scrip was up Rs 8.85 to Rs 190.75.

Meanwhile, old economy shares hogged the limelight today with ITC Ltd leading the sensex upwards by another 41 points on the Bombay Stock Exchange.

Tata group shares faced the glare of the arc lights after a long time. Institutional investors trooped back to the neglected counters as most of the group companies are expected to reap the returns of a painful restructuring process which has been continuing for the last few years.

It seems that the domestic markets were the only markets to have closed in positive territory. South east Asian markets like Hongkong and Singapore closed today with hefty losses, partly aiding the downtrend in technology stocks.

The BSE-30 share sensitive index opened lower at 3,977.58, the lowest level of the day, and gradually moved up to the high of 4,067.66 before closing at 4,060.02 as against yesterday’s close of 4,018.88, netting a gain of 41.14 points or 1.02 per cent


Mumbai, Jan 3: 
Tata Steel today announced that it is in the process of setting up a 1.20 lakh tonne ferro chrome plant in Australia at a cost of US $ 50 million.

The company’s decision to set up a ferro chrome plant in Australia was due to the availability of low-cost electricity, almost one-fifth the cost of power in India.

Addressing a hastily organised press conference in the city today, Tisco chief J J Irani said, “Ferro chrome consumes a lot of power. It constitutes as high as 65 per cent of the cost of production of ferro chrome in India.”

The entire cost of setting up the plant will be met through Tata Steel’s internal accruals, he said.

According to him, the cost of power in India is equivalent to 9 per cent per unit as against 2-3 per cent per unit in rest of the world.

Irani also revealed that his company was considering setting up units in West Asia. However, these are at a very prelimnary stage, he added.

Meanwhile, Tata Steel has also pruned its manpower to below 50,000 as on January 1, 2001, as against 78,000 odd employees a couple of years ago. “We expect to trim our manpower to 48,000 by April 1, 2001,” he declared. The entire modernisation exercise at Tata Steel will add up to a whopping Rs 8000 crore, he said.

The Tisco chief also announced he would be retiring by the middle of this year.


Mumbai, Jan 3: 
The Supreme Court today directed ANZ Banking group to deposit Rs 1522 crore (Rs 912 crore along with interest) with National Housing Bank (NHB) in a case that harks back to the 1992 securities scam.

In a interim order passed today, the apex court said the Australian group will have to deposit this amount with NHB till such time as the court disposes of the case by April. It may be recalled that ANZ Banking group sold its Indian operations to Standard Chartered last year.

Reports earlier said the Reserve Bank of India would demand a “comfort letter” from Standard Chartered to honour Grindlays’ potential liabilities in the long-running case, and that ANZ was not willing to commit on its liability.

However, a Standard Chartered official told this paper that his bank has nothing to do with the matter. “ANZ Banking group is liable to pay”.

Under the sale agreement, it is said ANZ had promised to provide Standard Chartered with indemnities on credit and litigation matters. In 1992, ANZ Grindlays received a claim in the wake of a share-trading scam of about Rs 700 crore from the National Housing Bank, after the proceeds of nine cheques drawn by NHB were credited to one of Grindlays’ customers. In 1997, arbitrators to the dispute made a Rs 900 crore award of principal and interest to ANZ.

The special court of Justice S.N. Variava set aside the arbitration panel’s award providing for the payment of over Rs. 900 crore by the NHB to ANZ Grindlays Bank in a dispute relating to the 1992 securities scam.

Setting aside the decision of the arbitration panel’s award, Justice Variava said it was based on wrong principles of law. He said the burden of proof in this case rests on ANZ Grindlays and not on NHB. The practice of depositing cheques in a third party account (in this case Harshad Mehta) by ANZ Grindlays was not in good faith.

ANZ Grindlays was given 30 days’ time to file an appeal against the order in the Supreme Court.

According to the ruling, ANZ Grindlays will have to pay the relevant amount only after the final verdict of the Supreme Court.


New Delhi, Jan 3: 
Major car companies today announced price hikes ranging from Rs 1,000 to 17,000 almost a month after Maruti Udyog said its vehicles would cost 5 to 7 per cent more.

The market leader has not gone ahead with the planned hikes, but the revisions come against the backdrop of slowing sales in recent months. On Tuesday, it said December sales dwindled 23.3 per cent while the nine-month tally was down 21.1 per cent.

Daewoo Motor India (DMIL) today said it will increase the prices of its small car Matiz by Rs 6,000 to Rs 12,000 from mid-January. All four variants, which are priced between Rs 3 lakh and Rs 4 lakh (ex-showroom Delhi), will become dearer.

“We have been holding our prices for a long time. The increase has become inevitable,” Y. C. Kim, CEO and managing director of Daewoo Motors India, said. The pressure to raise prices has come from a weak rupee, uniform sales tax and rise in steel and fuel prices. The company said the price revisions had nothing to do with the problems of its parent.

The Matiz SS model will be available in Delhi for Rs 2.99 lakh, SD model for Rs 3.36 lakh, SG model for Rs 3.52 lakh and SA model for Rs 3.98 lakh.

Daewoo India has lined up an aggressive marketing initiative to be launched this month, which will include warranty schemes up to four years. The dealership network and after-sales support outlets, key to servicing customers, will be beefed up.

Hyundai said the prices of its Santro and Accent models will go up by 2.04 per cent to 2.24 per cent respectively.

Ford India said all the five variants of its mid-sized car, Ikon, will be dearer by Rs 1,000 to Rs 10,000, effective January 1. The 1.3 CLXi Ikon (without power steering), which is now available for Rs 5.16 lakh, will cost 7,000 more in Delhi; the 1.3CLXi (with power steering) will cost Rs 5.45 lakh. The price of 1.3 EXi (without power steering) will increase by Rs 8,000 to Rs 5.84 lakh while the 1.6 ZXi will cost Rs 10,000 more at Rs 6.40 lakh.

In Calcutta, EXi (without power steering) will be priced at Rs 5,47,675 (Rs 5,40,669 earlier), EXi (with power steering) at Rs 5,71, 135 (Rs 5,64,194) and Exi (deluxe) will at Rs 6,10,709 (Rs 6,02,721). The prices of 1.8 ZXi and limited-edition SXi variants will go up by Rs 1,000 and Rs 9,000 respectively from Rs 6.55 lakh and Rs 7 lakh. “The 1.8 ZXi will now have optional fog-lamps which will cost an additional Rs 4,000 more,” a company official said.

In Calcutta, the ZXi model (with fog lamps) will cost Rs 6,73,236; the diesel 1.82 XI model will be available for Rs 7,47, 196.

Toyota Kirloskar Motors has raised the prices of Qualis, its popular multi-purpose vehicle, by Rs 17,000. “The rise covers all three variants of Qualis,” an official said. At present, the FS, GS and GST variants of Qualis are priced between Rs 5 lakh and Rs 8.5 lakh.

In Calcutta, the FS models (B1/B4), with a Euro I engines, will cost Rs 5,23,850; the B2/B5 AC models, with Euro II engines, will sell for Rs 5,86, 850. Among the GS versions, the C1/C5 models, with Euro I engine, will cost Rs 6,62,850 while the same model with a Euro II engine, will be available for Rs 6,85, 850. The C9 version will sell for Rs 8,03, 950 now.

In the GST series, the price of the D3/D6 model (Euro I) will be Rs 8,04,850 in Calcutta while the same vehicle with a Euro II engine will cost Rs 8,26,850 after the price revisions.



Foreign Exchange

US $1	Rs. 46.71	HK $1	Rs. 5.90*
UK £1	Rs. 70.23	SW Fr 1	Rs. 28.80*
Euro	Rs. 44.58	Sing $1	Rs. 26.60*
Yen 100	Rs. 40.82	Aus $1	Rs. 25.95*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4605	Gold Std(10 gm)	4530
Gold 22 carat	Rs. 4350	Gold 22 carat	4190
Silver bar (Kg)	Rs. 7575	Silver (Kg)	7675
Silver portion	Rs. 7675	Silver portion	7680

Stock Indices

Sensex		4060.02		+41.14
BSE-100		2067.60		+14.01
S&P CNX Nifty	1291.25		+19.45
Calcutta	125.00		+1.68
Skindia GDR	648.52		+8.48

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