Lid blown off risky stock loans
Nasscom chief Dewang Mehta dies in Sydney
Hugar at Global Trust helm
Limited mobility gets Icra boost
3-pronged Philips turnaround plan
Foreign Exchange, Bullion, Stock Indices

 
 
LID BLOWN OFF RISKY STOCK LOANS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 12: 
A joint committee of the Reserve Bank (RBI) and Securities and Exchange Board of India (Sebi) has found that two banks lent more money against shares than they are allowed to, while many granted loans to members of the same family/employees of a company, some times to subscribe to initial public offerings (IPO).

The findings lend credence to reports that banks exceeded the cap on investment in shares. The committee, which submitted its report today, said two banks had overshot the ceiling, one of them by 3 per cent. The excess amount poured into the stock market is estimated at Rs 77 crore.

Members of the committee did not identify the two banks but gave indications that they are from the private sector. Officials on the panel said action might be initiated against them.

The committee observed that some new private sector banks had been ‘quite liberal’ in fixing the limits on exposures to the capital market, including guarantees issued on behalf of brokers.

In spite of the liberal limits fixed by the boards, two banks exceeded it. It was clear that the boards of some banks did not have a prudent policy, nor did they put in place adequate risk management systems for their exposures to sensitive sectors,” the committee has said in its report.

Loans against shares, both fund and non-fund based, stood at Rs 8361.14 crore on February 28. The exposure of some new private sector and foreign banks was on the higher side.

Given the large amount of funds poured into to the capital market without adequate prudential safeguards, the committee was of the view that the aberrations in compliance, though limited to a few banks, must be checked.

The committee said the RBI norm which caps investments in the capital market at 5 per cent of a bank’s outstanding advances in the previous year was good enough. This covers investments in equity shares, convertible debentures, units of equity oriented mutual funds, advances against shares and debentures including issue of bank guarantees on behalf of brokers. Loans given to individuals against shares for personal purposes like education, housing and consumption will also be included in this category.

“With the overall ceiling, direct investments in shares, convertible debentures and units of equity-oriented mutual funds should not exceed 20 per cent of a bank’s net worth,” it added.

The panel has advised the boards of banks to determine their own limits for investments and advances against shares, loans to brokers and market makers (both fund and non-fund based guarantees) within the total 5 per cent ceiling.

To limit the impact of a market slump on the value of securities held as collateral, the committee said the margin on advances against shares and debentures should not be less than 50 per cent.

The committee said a minimum margin of 50 per cent should be collected, of which at least 25 per cent should be in cash, before they issue guarantees on behalf of brokers. The track record and credit worthiness of brokers must be taken into account before lending.

Banks which do not have enough expertise in dealing with the capital market should set low ceilings for advances against shares. “They should look at a broker’s portfolio of shares and ensure they are not prone to volatility.”

In the wake of the scam at Madhavpura Bank, the panel was of the opinion that primary co-operative banks should not be allowed to grant loans, either fund based on non-fund based, against the security of shares and other capital market instruments.

   

 
 
NASSCOM CHIEF DEWANG MEHTA DIES IN SYDNEY 
 
 
BY OUR BUREAU
 
New Delhi, April 12: 
Dewang Mehta, the prominent and charismatic president of India’s National Association of Software and Services Companies (Nasscom) was found dead in his hotel room in Sydney on Thursday. He was 38.

Information technology minister Pramod Mahajan, who was on a networking trip with Mehta in Australia, said his body was found after he failed to wake up in the morning.

Police after carrying out the required investigation in the hotel took the body for medical examination, vital to know the cause of Nasscom chief’s death.

Mehta, who along with Mahajan was staying in the Park Hyatt, was scheduled to leave for India around 1830 hrs this evening (Sydney time), but he did not check out till 1700 hrs.

When he did not respond to several calls by the tele-board of the Park Hyatt to remind him about his travel plans, the hotel staff got apprehensive and forced open his room door only to find him dead.

The minister said prima facie, his death appears to be due to natural causes. “But the exact cause could be confirmed only when the report is available.”

Mahajan summed up his feelings in a snappy comment: “He was the real information technology minister of this country.”

For a man who tried to tell people that computers are not meant only for bleary-eyed geeks beavering away in cramped cubicles, destiny denied the Elvis Presley of India’s software industry the time to complete his message.

His death left colleagues, barons and the IT world stunned on a day when technology shares took one of their worst beatings ever due to growing concerns about a US economic slowdown.

As a software evangelist, a title earned for his untiring devotion to the cause of promoting the country’s fledgling software enterprises, he used his flamboyance and a flair for public relations to win concessions from a tight-fisted bureaucracy.

A chartered accountant with a degree in computer graphics and an award for animation under his belt, the 38-year-old Mehta built Nasscom from an obscure industry association with no more than 38 members in 1989 to a formidable forum which has secured the participation of over 800 firms.

“Dewang’s untimely death has taken away a champion of India’s software industry,” said Saurabh Srivastava, old friend, executive chairman IIS Infotech and Nasscom co-founder. Struggling to cope with the reality of his loss, he talked about how Mehta sent him an emotional e-mail two days back to say he was about to complete 10 years at the 13-year-old Nasscom.

The scene at Delhi’s Nasscom office, which closed for the day after the news, said it all — stupefied employees struggling to hold back tears, but breaking down when they saw close friends of Dewang, including journalists, trickle in.

NIIT chief Rajendra S Pawar said Mehta had done more for the industry than anyone before.

“It is shocking,” said Nandan Nilekani, president and chief operating officer of Infosys Technologies, a bellwether which has come to symbolise the country’s ambition to break into the big league of global technology titans.

   

 
 
HUGAR AT GLOBAL TRUST HELM 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 12: 
Former Corporation Bank chairman R.S. Hugar will be the new chairman and managing director of the beleagured Global Trust Bank. The GTB board today decided to appoint Hugar after Ramesh Gelli, who has been in the centre of controversy for his alleged involvement with broker Ketan Parekh, announced his decision to step down yesterday.

The appointment of Hugar is likely to end a fortnight of trouble for the bank, that is embroiled in the controversy involving Big Bull Ketan Parekh, who is accused of swindling money from Bank of India to GTB.

The bank is also accused of bending rules to finance scores of other brokers and financing more funds into stock markets than what is permitted by the Reserve Bank of India.

Hugar, who was the chairman and managing director of Corporation Bank from April 1997 to May 2000, is already on the GTB board. At present he is the director of Institute of Banking, personnel section.

Reacting to his appointment, Hugar said he was surprised by the sudden offer of the board. “This is my second innings and I want to take GTB to new heights,” he said in a statement.

GTB officials revealed that when Hugar was broached about the appointment he was honestly taken aback.

“Hugar was pleasantly surprised, but nevertheless delighted by the sudden offer of the board,” the officials said.

Gelli, who has been in the eye of storm over alleged price rigging and had to abort the merger proposal with UTI Bank, said yesterday that he was stepping down as the chairman and managing director of the bank.

He requested the board today to allow him to step down.

According to a release, the board considered his request to step down. “On the insistence of Gelli, the board has very reluctantly accepted his resignation while recording in detail its appreciation of his role in detail for growing the bank from a scratch to its current level of over Rs 13,000 crore.”

The statement said Gelli would, however, continue to be associated with the bank and share his experience with the new team.

Banking circles acknowledge that with Hugar’s appointment, GTB can leave all the controversies behind and focus on the future. It is during Hugar’s time that Corporation Bank was rated as the number one bank in the entire banking sector.

   

 
 
LIMITED MOBILITY GETS ICRA BOOST 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 12: 
Credit rating agency Icra has predicted a promising future for limited mobility services using the wireless in local loop technology.

Icra said the services, approved by the communications ministry today, will cater to a niche market and not be the threat to cellular services that the cellphone operators fear.

The Icra industry watch series on the telecom sector says: “WiLL services with limited mobility may compete with cellular services for customers who do not have significant roaming patterns or for customers who do not attach value to the wider range of services that a cellular network offers.” It has also forecast that mobile cellular services might equal 15 per cent of the penetration achieved by fixed telephones over the next five years. Further, it observes that cellular wireless services will increasingly serve voice applications while fixed lines will evolve towards low-cost, high-speed data applications.

The total number of cellular subscribers in the country was estimated to have grown by more than 3.6 million by the end of March this year. Icra expects this number to go up to around 6 million by the end of the current financial year and to 18-20 million by year 2005. “This trend is expected to gain momentum as cellular technology improves, competition increases and subscriber bases go up and prices of cellular services decline,” says the report.

Icra believes cellular service growth will be dependent on regulatory solutions that advance competition within the cellular services sector.

   

 
 
3-PRONGED PHILIPS TURNAROUND PLAN 
 
 
BY A STAFF REPORTER
 
Calcutta, April 12: 
Philips India Limited (PIL) has drawn up a three-pronged strategy to recover from its losses and stage a turnaround.

The major strategy revolves around a reduction in cost, reshuffling of the product portfolio and a complete overhaul of the sales and distribution system, chairman S.M. Datta said, adding the measures will yield results in 2001. Addressing shareholders at the company’s 71st annual general meeting (AGM), Datta said even though the company made considerable efforts, it failed to attain the projections in certain businesses like consumer electronics and domestic appliances.

At a time when business volumes are shrinking and the market has become more or less stable, there was no alternative other than to reduce fixed costs, which the company has been trying to do in the past few months. “We cannot reduce the fixed costs. But we have to maintain it through sales volumes,” he said.

Efforts will be made to focus on higher selling products, which will be supported by a complete overhaul of the sales and distribution system, he added. However, Datta failed to give a timeframe for the turnaround.

He said Philips, which is stagnating with roughly 4 per cent marketshare in CTVs, has been hit by the downturn in the consumer electronics business.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.90	HK $1	Rs.  5.90*
UK £1	Rs. 67.27	SW Fr 1	Rs. 26.95*
Euro	Rs. 41.52	Sing $1	Rs. 25.50*
Yen 100	Rs. 39.95	Aus $1	Rs. 23.20*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4365	Gold Std (10 gm)Rs. 4255
Gold 22 carat	Rs. 4120	Gold 22 carat	Rs. 3935
Silver bar (Kg)	Rs. 7375	Silver (Kg)	Rs. 7365
Silver portion	Rs. 7475	Silver portion	Rs. 7370

Stock Indices

Sensex		3183.77		-141.69
BSE-100		1472.93		- 62.06
S&P CNX Nifty	1024.90		- 41.90
Calcutta  	 110.99		-  3.53
Skindia GDR	 587.89		- 12.37
   
 

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