Hunt for market monsters widens
BoP fears spark loan curbs
GTB resurrects insurance from merger muddle

 
 
HUNT FOR MARKET MONSTERS WIDENS 
 
 
FROM SATISH JOHN
 
Mumbai, April 8: 
With a week to go for the April 15 deadline set by the finance ministry to present its report on the recent bear hammering, the Securities and Exchange Board of India (Sebi) has decided to widen the probe by including the price rigging by bulls in the days which led up to the budget.

This is the first time after the March 2 missive from the ministry that the size of the investigation is becoming clear. Earlier, it was presumed that the probe would focus mainly on the alleged mauling of stock prices by a bear cartel.

The finance ministry, smelling a rat in the way stocks were battered a day after the budget, had ordered the capital market watchdog to investigate the plunge, believed to have been engineered by a cabal of bear operators out to make a killing and submit a preliminary report by April 15.

“The report will uncover the facts behind the price manipulation, a practice at the root of most recent events that overwhelmed stock markets. The dimensions of the probe are wide and quite comprehensive,” a senior Sebi official said.

“Bear hammering is the tip of the iceberg. The investigation will try to find out what lay behind the chain of events which lead to the unusual price movements in a handful of momentum scrips,” he added.

Sebi’s investigative wing will rely extensively on data culled by the surveillance departments of three main stock exchanges to expose the rogues who orchestrated the slide in a few scrips.

National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and the Calcutta Stock Exchange (CSE) have been asked to furnish details of trading data amid indications that Sebi executive directors (EDs), Ashok Kacker and C M Mehra, may be asked to join the hunt for market monsters.

Kacker will continue to handle mutual funds and investor grievances, while Mehra, who oversees foreign institutional investors and general administration, has been asked to lead investigations into former BSE president Anand Rathi’s case.

There is a feeling that letting L K Singhvi, senior executive director who is a nominated member on the BSE board, conduct the probe is an embarrassment.

Mehra has since been given additional responsibilities: he is investigating the price manipulations in the shares of Amara Raja Batteries and Cyberspace Infosys, Sebi sources said.

This will lighten Singhvi’s burden, who can now concentrate on wrapping up his work within the fast-approaching deadline of April 15 fixed by the finance ministry.

The market regulator has been under mounting pressure from the ministry, which was upset at the way a clutch of bear operators were frustrating its attempts to jump-start bourses.

Markets applauded the budget with a 177-point surge in the BSE sensitive index (sensex) on February 28. On March 1, the index finished 25 points higher after gaining 140 points during intra-day trading. The 176-point plunge the next day was the last straw, and the ministry decided to get cracking.

   

 
 
BOP FEARS SPARK LOAN CURBS 
 
 
FROM R. SASANKAN
 
New Delhi, April 8: 
The finance ministry’s decision to stop states from taking multilateral loans indiscriminately was prompted not only by its concern over their growing fiscal indiscipline but also by the fear of a balance of payments (BoP) crisis.

The BoP position is comfortable and there is no danger of a crisis in the immediate future. International oil prices are unlikely to firm up in the coming months and exports are expected to do well.

However, there are certain unpredictable factors which could put the BoP under strain. The government is of the view that the removal of quantitative restrictions (QRs) would not lead to an immediate import surge. However, the import bill will begin to rise after a year or two. There is no guarantee that exports will catch up with the rise in imports.

The Centre has been pursuing a policy of limiting external commercial borrowing to prudent levels. Though the states cannot borrow without the Centre’s permission, the relaxation allowing them to negotiate for loans directly with the multilateral agencies has resulted in a borrowing spree.

States with a high debt are more aggressive in negotiating and clinching loans from these bodies.

The Centre comes in to the picture only after a loan is negotiated. The World Bank has promised a $ 1 billion untied loan to Uttar Pradesh. Andhra Pradesh has got a power sector loan, and is currently negotiating a fresh one.

Rajasthan, Gujarat, Kerala and Orissa are also in the process of negotiating huge loans from World Bank and ADB.

The ultimate debt burden in terms of repayment liability falls on the Centre. It is in this context that the finance ministry told the two agencies not to negotiate loans directly with the states. For states, the advantage of untied loans is that these can be used for any purpose.

The total accumulated debt of all states combined was estimated at Rs 5,00,000 crore at the end of 1999-2000. Maharashtra, UP and Bengal have seen their fiscal deficit for 1999-2000 shoot up even though their share in accumulated debt was not very high. For instance, West Bengal had only a 9.5 per cent share in the total debt, but its fiscal deficit in 1999-2000 surged to 14 per cent.

Similar is the case with Maharashtra which had a 9 per cent share in accumulated debt, but ran a fiscal deficit of 14 per cent. UP had a fiscal deficit of 13.7 per cent. In contrast, Andhra and Tamil Nadu are healthy.

Though Andhra had a 7.6 per cent share in the accumulated debt, its fiscal deficit in 1999-2000 was only 5.41 per cent of the gross domestic debt (GDP). Tamil Nadu’s share was 5.5 per cent but its fiscal deficit stands at only 5.14 per cent of the GDP.

Officials say the curbs may hit efficiently run states like Tamil Nadu.

   

 
 
GTB RESURRECTS INSURANCE FROM MERGER MUDDLE 
 
 
FROM VIVEK NAIR
 
Mumbai, April 8: 
Global Trust Bank (GTB) is taking a fresh look at the insurance sector and will shortly start identifying suitable partners for the venture.

GTB, which had put several plans on hold following the announcement of the merger with UTI Bank, is reviving most of its projects, now that the proposed merger has been called off.

Apart from taking a relook at the insurance sector, GTB has also decided to persist with its earlier plan of an international listing and will shortly go in for GAAP accounting norms.

In fact, earlier this week, GTB chairman Ramesh Gelli told The Telegraph that the bank’s priority now was to complete implementation of the US GAAP, initiated before the merger talks. HR initiatives put on hold will also be considered afresh, he said.

While the bank is learnt to have identified the life insurance sector for its foray into the business, senior company officials said it was too early a stage to say anything on the issue. What they did confirm, though, was that a separate team based in Hyderabad will be set up shortly to study the bank’s insurance plans.

In fact, GTB had already short-listed around three partners for the venture, but the insurance foray plans were later put on a backburner as the merger with UTI Bank was announced.

“We were looking at the insurance sector independently prior to the merger proposal with UTI Bank. However, it was put in cold storage later. With the merger now called off, the bank will shortly start examining the proposal afresh again,” sources said.

GTB already conforms to the Reserve Bank of India’s norms on net worth and non performing assets (NPAs) for banks in the insurance sector.

For the year ended March 31, 2000, the bank had a net worth of Rs 540 crore, against the minimum requirement of Rs 500 crore by the central bank. During this year, the bank recorded an NPA level of 0.87 per cent. Sources added that the bank is likely to adopt the 76:24 shareholding pattern as followed by most other banks.

GTB may also revive the process of inducting another foreign partner in the bank, to whom it may allot an equity stake.

Last year, GTB was considering the possibility of offering fresh equity up to 20 per cent to a foreign bank, with the latter assisting it in risk management and retail banking operations.

It had also asked the International Finance Corporation (IFC) to identify suitable partners for the purpose. GTB had then said that apart from assistance in these two directions, the foreign bank should also have strong technical strength.

The bank had also put on hold an earlier decision to expand its ATM network to 123, as it then clashed with that of UTI Bank. This was in addition to branch expansions, which were also slowed down.

GTB sources said the bank is likely to activate all other plans which have been put on the backburner immediately and some concrete developments could be expected in the next couple of months.

   
 

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