Jalan bait for credit pickup
Sinha, industry happy
Fetters on premature withdrawals
Life ban for Harshad, trio in the dock
Spring cleaning for co-op banks
Sensex rallies 135 points more
Magors keep faith in India, to buy more tea gardens
Govt allows automatic FDI in finance firms
NIIT 2nd-quarter net up 31%
Foreign Exchange, Bullion, Stock Indices

 
 
JALAN BAIT FOR CREDIT PICKUP 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 19: 
Reserve Bank governor Bimal Jalan gave exporters cheap credit, allowed banks to lend below prime lending rates (PLRs) and unveiled a tighter set of norms aimed at insulating banks from the ills that afflict other parts of the financial system.

Expectations from Jalan’s credit policy ran high — he was supposed to fix problems and shovel more growth-inducing credit.

He made banks’ asset classification norms more rigorous, and though he did not winch down the cash reserve ratio (CRR) or the Bank Rate, he offered indications that money will neither be scarce nor expensive. He could not have done otherwise — not after the Federal Reserve’s snap rate cut on Wednesday.

Banks have been allowed lend above Rs 2 lakh to exporters or other credit-worthy borrowers, including PSUs, below PLR, which will now be treated as a benchmark, rather than a floor, at which loans have to be disbursed. The minimum maturity period for term deposits of Rs 15 lakh and above with banks has been reduced to seven days from 15.

The maximum that banks can charge on loans to exporters is the PLR. Pre-shipment credit up to 180 days, for instance, will be available at 1.5 percentage points below that key rate. On balance, the cost of credit will come down by 1-1.5 percentage points to 8.5-9 per cent.

Banks will earmark loans on which interest and/or instalment remain overdue for 90 days (180 days at present) as a non-performing asset from 2003-04. For financial institutions, the cut-off will be 180 days instead of 365.

The maximum that an individual can borrow from a bank will be an amount equivalent to 15 per cent of its capital, down from 20 per cent. Maximum exposure to a group has been fixed at 40 per cent and for infrastructure projects at 50 per cent. The changes have to be implemented this year.

Banks will earn more on cash balances maintained as part of CRR with the Reserve Bank. For the fortnight starting April 21, the interest rate paid will be raised to 6 per cent. At a later stage, the returns will match the Bank Rate.

RBI’s liquidity support has been split into normal and a back-stop facility. The former will be available at the Bank Rate while rates on the latter will be linked to a repo rate or the NSE-Mibor.

Jalan projected a growth rate of 6 to 6.5 per cent in the current fiscal while estimating the rise in GDP for 2000-01 at 6 per cent. He ruled out a full float of the rupee, saying the present policy of allowing market forces to determine the exchange rate was good enough.

Jalan said the ban on loans against shares by co-operative banks was aimed at plugging gaps in the sector. “If somebody classifies stocks as commodities and describes firms as corporations, what will you do?” Jalan said in remarks aimed at banks which lent recklessly to rogue brokers.

The shadow of the market mayhem hung over Jalan, who acknowledged that the package was being presented at a time when the resilience of the financial system was being put to test. “Serious lacunae have emerged in certain segments of the financial system,” he added.

   

 
 
SINHA, INDUSTRY HAPPY 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 19: 
Finance minister Yashwant Sinha said he was satisfied with the prudential norms for cooperative banks prescribed by the Reserve Bank of India (RBI) today, adding the government will examine the central bank’s suggestion that it set up an apex supervisory body for such banks.

“I am satisfied with the prudential norms they have prescribed for strengthening urban cooperative banks. The government will examine the suggestion for setting up an apex supervisory body,” Sinha said in a statement here.

Meanwhile, industry chambers welcomed the Reserve Bank’s credit policy, allowing banks to lend below the prime lending rates and lowering the export credit rate by 1.5 per cent, while enforcing stringent investment norms for urban cooperative banks.

Federation of Indian Chambers of Commerce and Industry (Ficci) president Chirayu Amin welcomed the RBI’s decision as a bold one and said credit lending at a lower rate to select borrowers should help bring down the entire lending rate structure.

Confederation of Indian Industry (CII) president Arun Bharat Ram said the flexibility provided to banks are “in line with international practices.” Associated Chambers of Commerce and Industry (Assocham) president Raghu Mody, however, said the RBI’s intention should have been matched by the lowering of the bank rate by at least 1 per cent and a further reduction in export credit rate, in view of the current economic slowdown.

The credit policy also found favour with bankers. P. S. Shenoy, chairman and managing director, Bank of Baroda (BoB) said he found it to be the “most comprehensively presented policy,” with steps taken in several directions for the financial sector as a whole.

   

 
 
FETTERS ON PREMATURE WITHDRAWALS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 19: 
Fresh from the Madhavpura crisis, the Reserve Bank of India (RBI) today gave banks the freedom to disallow premature withdrawals of large deposits held by entities other than individuals and Hindu Undivided Families (HUF).

In its Monetary and Credit Policy for the year 2001-02, the central bank however, said banks will have to inform such depositors of their policy of disallowing premature withdrawals in advance, at the time of accepting such deposits. As per the current guidelines on domestic deposits, it is mandatory for banks to allow premature withdrawals, if requested by depositors.

However, banks are free to prescribe a penal rate of interest for allowing premature withdrawals.

The RBI announced a package of measures encompassing changes in operating procedures of the liquidity adjustment facility (LAF), which provides money at interest rates determined by the money market.

This includes auction methods and periods, strategy for smooth transition of the call money market to pure inter-bank market and comprehensive programme for rationalisation of liquidity support available to the system at present.

The RBI said that while at present auctions under the LAF are conducted on a uniform price basis, it will introduce multiple price auction on an experimental basis for a one-month period during May.

The central bank also indicated that it would transfer its stake in the State Bank of India, National Housing Bank, Infrastructure Development Finance Company, Deposit Insurance and Credit Guarantee Corporation, Nabard, DFHI and Securities Trading Corporation of India (STCI), to the government.

   

 
 
LIFE BAN FOR HARSHAD, TRIO IN THE DOCK 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 19: 
The Securities and Exchange Board of India (Sebi) today handed down its first life ban to Harshad Mehta — a move redolent of Securities and Exchange Commission’s action against rogue dealers like Ivan Boesky and Mike Milken — and ordered his prosecution for involvement in the alleged price manipulation of scrips of BPL, Videocon International and Sterlite in 1998. The three companies have also been barred from accessing the capital market for four, three and two years respectively. The Sebi has ordered prosecution proceedings against the top officials of these companies.

Sources at Sebi said the market regulator will file a criminal complaint against the Big Bull of yester years in the court of first class magistrate shortly.

Passing the order today, the regulator said prosecution proceedings against BPL through five officials/directors have also been sought for violation of Sebi Act and regulations.

Similar proceedings are to be carried out against three directors/officials each of Videocon International and Sterlite industries.

Confirming the stringent action against Harshad Mehta and the three companies, Sebi chairman D.R. Mehta said the stock broker was involved in the price-rigging during 1998 in the shares of BPL, Videocon and Sterlite.

Categorically denying any involvement in the price rigging case, Sterlite Industries said it will go to the Security Appellate Tribunal against today’s order. “The whole matter relates to the purchase of six lakh shares at the request of BSE authorities. The BSE authorities approached us in June 1998 to acquire shares of the company so that a major payment crisis in the BSE could be averted.”

“The sole intention was to help the BSE to avert a major payment crisis and we fail to understand how this one transaction could be construed as manipulation of share prices,” the company added.

The Sebi investigations were completed in three stages. In the first stage, it was brought out that a set of brokers and sub-brokers, acting on behalf of a common set of clients who were acting as a front for Harshad Mehta, cornered large chunk of shares of these three companies.

According to Sebi, this led to price manipulation in these shares. At the initial stage of the investigations in December 1999, Sebi had asked the then BSE president J.C. Shah to resign. The then BSE vice-president Rajendra Banthiya too had resigned following investigations. Later, investigations were completed against Harshad Mehta and the three companies by October 1999. Show cause notices were issued to them in December 1999.

After giving the opportunity of final hearings in March and April this year, the Sebi ordered action against them.

Bar on First Global, Bang & CSFB

Sebi has barred three entities and their investment firms belonging to Shankar Sharma’s First Global, top broker Nirmal Bang and the broking arm of Credit Suisse First Boston (CSFB) from undertaking broking business till further orders. The capital market regulator today conveyed its decision to the Bombay Stock Exchange and to the nine firms of these three entities not to undertake any fresh orders under section 11 of the Sebi Act, which empowers it to take action in the interest of market integrity and the investors. However, First Global directors denied involvement in manipulation of share prices.

   

 
 
SPRING CLEANING FOR CO-OP BANKS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 19: 
The Reserve Bank of India (RBI) has called for a separate regulator to keep tabs on urban co-operative banks (UCBs) and stopped them from lending against the security of sharers as part of a new set of prudential norms aimed at making them safe for depositors and members.

The proposed body, which will inspect and supervise scheduled and non-scheduled UCBs, could be run by a board comprising representatives of the Centre, state governments, the RBI and experts.

The moves are seen as the central bank’s response to the recent string of scams which were engineered by rogues who used funds from banks like Madhavpura Mercantile Co-op bank and Classic Co-op Bank to stake out stock bets that came unstuck.

RBI governor Bimal Jalan said loans against shares have been banned so that members and depositors feel safe.

“Co-operative banks have a role which is different from others in the industry. Our task is to make them stronger,” he added.

Co-operative banks understand the needs of a state, area or a profession better. “There are over 2,000 banks, most of them small in size. A few give the whole co-op bank sector a bad name,” he added. Scheduled UCBs are inspected once in two years, non-scheduled UCBs once in two-three years and those identified weak every year.

UCBs with deposits of Rs 25 crore and above have been asked to maintain investments in government securities only in subsidiary general ledger (SGL) accounts with the RBI or in similar constituent accounts of state-owned banks.

They have been allowed to increase the proportion of investments they can make in approved securities by March 2002. From April 1 2003, their SLR investments — 25 per cent of net demand and time liabilities — will have be limited to gilts and other approved securities.

“At present, co-operative banks are not permitted to invest directly in stock markets or lend to brokers. Earlier, they could lend up to Rs 10 lakh to individuals against shares in the physical form and up to Rs 20 lakh against demat scrips,” the Reserve Bank said in its credit policy announcement.

“A few urban co-operative banks have ignored present guidelines and established a nexus with brokers to operate in the stock market. In order to prevent misuse of funds in future, it is necessary to stop lending by UCBs directly or indirectly to individuals or companies,” the apex bank said.

   

 
 
SENSEX RALLIES 135 POINTS MORE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 19: 
The cheer on the US bourses brought the smiles back to the Bombay Stock Exchange (BSE) today, with the benchmark index gaining 135 points at close, as foreign institutional investors (FIIs) continued their spirited buying of shares at bargain prices.

An upbeat Nikhil Khatau, chief executive of Sun F&C Mutual Fund, said foreign investors have found value in undervalued Indian stocks. “Values are returning to stocks and stock prices have a long way to go.”

The market started off on a strong footing, with the sensex opening at 3552.17. However, even at that point, there was no indication of the roller-coaster that was to follow.

Bolstered by the US Federal Reserve’s surprise move to cut rates by 50 basis points yesterday, the sensex sky-rocketed to the day’s high of 3621.03. Later, the BSE barometer touched a low of 3471.03 just before noon when public investors as well as a few FIIs and domestic FIs booked profits at higher levels, on news of trouble brewing on the eastern border alongside Bangladesh.

It finally settled down to close at 3574.08, as against yesterday’s close of 3438.75, a net rise of 135.33 points or 3.94 per cent. The BSE-100 index was up by 49.81 points at 1686.10 from the previous close of 1636.29. The upbeat mood largely due to the staggering jump in equity values on the US markets. The Nasdaq composite index gained almost 156 points while the Dow Jones Industrial Average gained more than 399 points, the third-largest rise in its history. Infosys Technologies rose a whopping 17.63 per cent on the Nasdaq.

Despite sustained net purchases by FIIs—the principal moving force on the market today—and all the optimism about an impending rally, speculators were unwilling to make fresh commitments till the BSE barometer touched the 3800-level, in view of several trading restrictions.

The Reserve Bank of India’s monetary policy too had little effect, with dealers expecting a reaction tomorrow.

Reliance was the highlight of the day, which rose by Rs 41.40.

Though the gains notched up by the index heavyweights were not symbolic of the whole market and losses outnumbered the gains, the sensex was well supported by the heavyweights.

Volumes improved moderately to Rs 1827.94 crore from yesterday’s turnover of Rs 1450.44 crore.

   

 
 
MAGORS KEEP FAITH IN INDIA, TO BUY MORE TEA GARDENS 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, April 19: 
The Magors do not intend to sell the gardens belonging to George Williamson (Assam) and intend to pursue a policy of “judicious acquisition” of tea estates in Assam.

“We are long-term buyers, not sellers. We have been operating in India for 150 years and we have an on-going commitment to quality tea production,” Philip Magor, chairman of Williamson Tea, told The Telegraph over the phone from London.

Williamson Tea Holdings plc will take full managerial control of George Williamson. It owns 17 tea estates in Indian and four in Kenya,

Magor was attempting to cap speculation in the media that the family would be scouting for a buyer for its tea interests in India after they dissolve their 40-year-old partnership with the B.M. Khaitan Group.

“We have been partners with the Khaitan family for many years,” Magor said. “However, recently, both sides felt it was better for the long-term development of our respective businesses for us to separate and for Williamson Tea Holdings to take full control of all our growing manufacturing and support services in India. In future, all tea sold by us will be produced on our own estates to our demanding standards of quality.”

Magor added, “This arrangement is entirely amicable, and reflects the various parties’ long-term strategic interests. Our motto for years has been to stick to tea and that’s exactly what we are doing.”

“In the last few years, we have been increasingly focused on the production of high quality teas. It makes more sense for us to control the whole production process so that we can achieve the consistent standards of quality we are looking for,” he said.

Magor will be coming to Calcutta to attend a board meeting of George Williamson (Assam) on April 24.

During his visit, he will hold talks with the Khaitans on disentangling their cross holdings in group companies. The Khaitans hold 9 per cent in George Williamson while the Magors have a 26 per cent stake in the Khaitan-owned Williamson Magor.

These cross shareholdings will be eliminated in time, subject to regulatory approval, Magor added.

As part of the company’s long-term plans to build the Williamson brand, the names of member companies will be changed. Williamson Tea Holdings will become Williamson Tea, George Williamson (Assam) will be rechristened as Williamson Tea Assam, and George Williamson Kenya will become Williamson Tea Kenya. The Magors have been operating in Kenya for 50 years.

The new managing director of Williamson Tea Assam will be S.K. Mitra.

When contacted, Mitra said, “I haven’t been told yet when I shall join as managing director of the company.”

Top-level officials feel that the differences between the partners arose after the Magors rejected the price at which the Khaitans had offered to sell two gardens — Behali and Mijicajan.

Khaitans had asked for a price ranging between Rs 35-40 crore. “The Magors found the price too steep,” officials said.

Meanwhile, the news of split between the partners has sparked fears about the security of their jobs among the employees of George Williamson. However, officials said the Magors did not intend to retrench anyone.

   

 
 
GOVT ALLOWS AUTOMATIC FDI IN FINANCE FIRMS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, April 19: 
The government today announced that foreign investments in non-banking finance companies (NBFCs) will be allowed through the automatic route.

A statement issued by the ministry of industry said the Reserve Bank of India (RBI) will be soon issuing guidelines on this.

Foreign direct investment through the automatic route means that an investor can bring in his money without any formalities except informing the RBI about his intentions.

The government also allowed overseas investors to set up 100 per cent operating subsidiaries without the condition to disinvest 25 per cent equity to Indian entities.

However, the freedom has been given subject to a minimum FDI inflow of $ 50 million without any restriction on the number of operating subsidiaries.

The government has also allowed joint ventures operating NBFCs, with 75 per cent or less foreign investment, to set up subsidiaries subject to a minimum upfront capital inflow ranging from $ 0.5 million to $ 5 million dollar.

The official statement said that the requirements regarding the quantum of capital inflows would continue. Under the existing norms, if the FDI is less than 51 per cent, an upfront investment should be $ 0.5 million.In case the FDI is more than 51 per cent, the requirement for upfront inflows is for $ 5 million.

For 75 per cent to 100 per cent FDI, the minimum inflows would be $ 50 million of which $ 7.5 million would need to be brought in upfront and the balance in 24 months.

Excepting a few strategically important areas, the government has already brought in the automatic route for many sectors.

K.K.Sengupta, a leading merchant banker, described today’s announcement as “long expected and something which should go a long way in bolstering investment in this country.”

   

 
 
NIIT 2ND-QUARTER NET UP 31% 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 19: 
NIIT registered a 31.44 per cent growth in net profit at Rs 48.33 crore in the second quarter ending March 31 as against Rs 36.77 crore achieved during the same period last year.

The global revenue of the company and its subsidiaries, however, fell from Rs 353.74 crore recorded in the same period last year to Rs 351.82 crore during the period under review.

The global revenue reflects the impact of the US slowdown as well as de-emphasis on the high revenue-low profit systems integration and software product distribution, said Vijay K Thadani, chief executive officer of NIIT Ltd.

The US slowdown may eventually lower the operating profits of the company by 30-40 per cent at the end of the current fiscal in September 2001, he added.

“The global economic slowdown and the general lowering of sentiment can have an adverse impact on the operating profit of the company, which could drop by 30-40 per cent over last year’s operating profit,” Thadani said. Net income from operations of NIIT Ltd during the period stood at Rs 217.03 crore, up from Rs 209.96 crore recorded last year.

Corroborating Thadani’s view, Rajendra S Pawar, chairman of NIIT said “The global economic slowdown is turning out to be more rapid and pervasive than anyone had estimated earlier.”

While gearing up for the uncertainties in the next six to nine months, the company is investing in re-training the workforce on new technologies; aggressively building the NIIT brand, creating new content and curriculum; building re-usable software components and upgrading process quality in the software factories, he added.

Optimistic about the future, Pawar said that as the impact of the global slowdown fades away, Indian information technology sector will rebound strongly through accelerated outsourcing. NIIT intends to improve competency during this period.

The company’s global learning solutions recorded revenues of Rs 159.5 crore, up 26 per cent from last year. At present, it constitutes 45 per cent of NIIT’s global revenue.

The global software services revenue of the company grew by 26 per cent at Rs 123.9 crore. Business from Europe grew by 53 per cent. The company’s software services business is expected to grow only by 20 per cent this year..

HCL Tech net soars

HCL Technologies reported 96 per cent rise in net profit to Rs 129 crore in the third quarter ending March 2001 over Rs 65.9 crore in the corresponding previous quarter. Gross revenue rose 53 per cent to Rs 363.2 crore over last year’s Rs 237.5 crore, a company statement said here.

For the nine months, HCL Technologies posted a massive 134 per cent increase in net profit to Rs 343.5 crore as against Rs 147.1 crore recorded in the corresponding period last year. Gross revenue increased 61 per cent to Rs 1,023.2 crore in July-March 2000-01 compared to Rs 636.3 crore of the previous year. HCL Tech revised upwards net profit estimates for the fiscal to Rs 480 crore against Rs 243.3 crore of last year, representing 97 per cent increase.

Sun Pharma net up

Sun Pharmaceutical Industries Ltd has posted a 48.80 per cent increase in net profit at Rs 134.92 crore for the year ended March 31, 2001 as against Rs 90.67 crore in the previous fiscal. The company’s net sales increased by 28.72 per cent at Rs 613.23 crore as compared to Rs 476.42 crore in the previous fiscal, SPIL informed the Bombay Stock Exchange in a notice here today.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.85	HK $1	Rs. 5.95*
UK £1	Rs. 67.05	SW Fr 1	Rs. 26.75*
Euro	Rs. 41.48	Sing $1	Rs. 25.65*
Yen 100	Rs. 38.50	Aus $1	Rs. 23.25*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4355	Gold Std (10 gm)Rs. 4265
Gold 22 carat	Rs. 4110	Gold 22 carat	Rs. 3945
Silver bar (Kg)	Rs.7375		Silver (Kg)	Rs. 7400
Silver portion	Rs. 7475	Silver portion	Rs. 7405

Stock Indices

Sensex		3574.08		+135.33
BSE-100		1686.10		+ 49.81
S&P CNX Nifty	1144.45		+ 41.05
Calcutta 	 120.91		+ 4.12
Skindia GDR	 612.78		+ 29.99
   
 

FRONT PAGE / NATIONAL / EDITORIAL / BUSINESS / THE EAST / SPORTS
ABOUT US /FEEDBACK / ARCHIVE 
 
Maintained by Web Development Company