SBI prunes interest rates 50 points
Brokers to tapSinha, Sonia for support
Uco links arrears to support for revamp
Retail loans turn dearer
Seagate in search of allies
Operation Spidernet to weave Apple network

Mumbai, Aug. 4: 
Faced with declining yields and deposit glut, State Bank of India (SBI) today brought down its short-term lending rates and long-term deposit rates by 50 basis points.

While the bank’s short-term prime lending rate for maturities up to 180 days has been brought down to 10 per cent, the short-term prime lending rate for maturities exceeding 180 days but less than one year has been reduced by half a percentage point to 10.5 per cent. The new rate structure will be effective from August 6.

As far as the new deposit rates are concerned, interest rate on deposits of one year but less than two years has been brought down to 8 per cent, that for more than two years but less than three years to 8.50 per cent and for three years and above, it has now been pegged at 9 per cent.

However, SBI’s prime lending rate and medium term lending rate will remain unchanged and continue to be at the present level of 11.50 per cent and 12 per cent respectively.

Speaking to The Telegraph, SBI chairman Janki Ballabh said the “rationalisation” of interest rates has been made in keeping with the current market trend.

Pointing out that the reduction was “not unexpected”, he added that while the bank has already brought down long-term interest rates, a revision of the short-term interest rates was warranted as it was not done “for a long time”.

“We have been lending even below the PLR in some cases. Therefore, the bank wants to give advantage of lower interest rates to a larger spectrum of customers. We feel that this will help in improving the credit-deposit ratio,” he stated.

Bankers said though some of the nationalised banks have already brought down interest rates in the short-term, others who have not so far thought of such a move would now have to reduce their interest rates. It is also felt that most of the nationalised banks would now follow SBI in bringing down their deposit rates. Following the economic slowdown, banks have so far been grappling with the problem of lower credit offtake even as deposits have been on a roll.

With investor confidence taking a hit following the recent chaos at the Unit Trust of India (UTI) it is felt that deposits with banks will surge further.

On the other hand, bankers said, the corporate sector is now in a position to raise short-term funds at attractive rates through competitive instruments such as commercial papers (CPs). In fact, a CP for three months can now be raised at eight per cent as against over 11 per cent earlier.

Moreover, yields on corporate and government securities have also been showing a declining trend. “In such a situation, raising resources through high deposit rates is tough to sustain,” an analyst said.

The yields on the benchmark 10-year government security recently hit a low of 9.20 per cent. Money market observers said that today its yield declined to 9.30 per cent on news of the SBI announcement after early trading being done at 9.33 per cent.

Apart from changes in these short-term interest rates, SBI also reduced the rates of interest on NRNR deposits and NRE deposits by 50 basis points for all maturity periods.


Calcutta, Aug. 4: 
The Securities Industry Association of India (SIAI), the recently formed apex body of stockbrokers, will meet finance minister Yashwant Sinha on Tuesday to present their demands.

Representatives of the SIAI will also meet the Opposition leader Sonia Gandhi next week to garner support of the Congress and other parties on the issue. Alongside, the brokers’ forum is persuading various leading industrialists to support their case, a SIAI spokesperson said.

“SIAI is not opposed to reforms, but the steps taken by the market regulator should be in sync with what our infrastructure permits,” the SIAI spokesperson said. SIAI would request the government to revert to weekly settlement till a provision for electronic fund transfer is made.

SIAI will also seek the government’s clarification on demutualisation of bourses. “The government needs to lay down the regulations quickly. If it is not ready with it, it should allow the brokers to run the bourses till the regulations have been laid down.”

Unless the government comes up with clear guidelines on the corporatisation of bourses soon, the management of most of the traditionally broker-managed exchanges will run into rough with weather.

A case in point is the Calcutta Stock Exchange (CSE), which come September, must have its annual general meeting and elections for broker-directors in keeping with its statutes. But this will be a pointless exercise unless the elected directors are allowed to run the exchange.

Experts say, the recent spurt in activity on the wholesale debt market of the National Stock Exchange (NSE) and the interest in debt funds indicate that the market has an appetite for such instruments.

Brokers feel that a quick recovery of the Unit Trust of India will help their cause. “It is impossible to revive the beleaguered US-64 unless the market looks up. Further, a vibrant stock market will help the government obtain better value for the stake it divests in listed public sector undertakings like VSNL, IBP, CMC and Hindustan Zinc. The PSU stocks are far below their fair value and this is because the lack of depth in the market is affecting price discovery,” the SIAI spokesperson said.

Meanwhile, the SIAI has chosen Deena Mehta as its national convenor. It has also formed a steering committee comprising senior brokers from various exchanges. Among the members of the steering committee are Ajit Kumar Day (CSE), T. Prem Kumar (NSE), Bharat Bhushan Sahny (Delhi) and Anil Shah (Ahmedabad).


Calcutta, Aug 4: 
The city-based Uco Bank, which has agreed to pay the wage arrears of its employees, has sought the unions’ co-operation for its restructuring plans.

The bank wants the unions to support its move to close or merge 100 branches by March 2003 and its plan to transfer employees to meet the staff shortages arising out of the bank’s voluntary retirement scheme (VRS).

“Both these issues are pre-conditions for giving the wage arrears. We are now negotiating the matter with the top management. However, we are opposed to the idea of closing down branches,” a senior union member said.

Uco Bank, which has recorded profit for two consecutive years, wants to close down loss-making branches to boost profitability. The bank has already shut down about 40 branches last year.

Meanwhile, the bank’s top brass today held a marathon meeting to draw up the outlines of the joint declaration and the business targets that it wants to put before the employees in the current financial year. At present, the bank labelled a weak bank by the finance ministry, is implementing a restructuring plan as directed by the ministry.

The bank’s employees are also opposed to the idea of indiscriminate transfer of employees. The bank has decided to clear the wage arrears in three instalments. The arrears payable for the financial year 1997-98 (November 1997 to March 1998) amounting to Rs 7.03 crore and for the financial year 2000-01 (April 2000 – June 2000) amounted to Rs 13.56 crore will be released in the month of September 2001. The arrears payable for the year 1998-99 amounting to Rs 44.45 crore will be released in April 2002. Arrears payable for 1999-2000 amounting to Rs 44.20 crore will be released before October 2002.

However, the payment schedule for October 2002 will be reviewed through mutual discussions between the management and the unions.

Regarding the demand for payment of arrears to deceased employees and to those who retired in normal course and not as part of the VRS, the management has said it use its discretion to pay the entire arrears along with the first instalment after ascertaining the number of such cases and the amount involved. The bank had granted voluntary retirement to more than 5,000 people.


Mumbai, Aug. 4: 
The cost of retail loans from hire purchase and leasing companies is set to rise by 50 to 80 basis points following the government’s decision to levy a 5 per cent service tax on the interest and service charges. The government had, earlier this week, widened the scope of the service tax to include services such as financial leasing, hire purchase, credit card, merchant banking and forex broking. The tax, which came into effect from July 16, will be payable at the rate of 5 per cent.

Professionals in the finance industry are disappointed that the interest on the loans will be taxed. “This will increase the incidence of tax on borrowers and we expect a 50-80 basis point increase in interest rates,” said Mahesh Thakkar, special executive officer, Association of Leasing and Financial Service Companies. The industry welcomed the decision to leave out the principal component from the scope of the tax, but they said firms would still be at a disadvantage against banks, which do not have to pay any service tax.

“We compete against banks in this segment, but they are not subject to such taxes. The levy will make bank loans cheaper and we will have no borrowers,” sources said. Non-banking finance companies (NBFCs) had asked the government to impose the tax on management fees or service components, not on the interest or principal because that would make the cost of borrowing higher.

At present, an upfront charge ranging from 0 per cent to 3 per cent of the loan is collected as management fees — or processing fees, service charges and documentation charges — in lease and hire purchase transactions.


New Delhi, Aug. 4: 
Wired is fast becoming the way of life. It is not only at work where mobiles and PCs have taken over, but the gizmos have also intruded into your leisure hours.

As if that weren’t enough, the latest gizmo to hit town is a specialised hard disc incorporated in gadgets like air-conditioners and TVs, which will enable consumers personalise them. For example, it can automatically enable the TV to start recording one’s favourite programmes.

These discs come with no mean storage capacity — 20-40 gigabytes of data. Using PCs to send emails is commonplace, but when it comes to simple things like listening to music, it is still easier to turn on the radio than to configure the PC to play high-quality streamed audio from the internet radio system.

Well, not any longer. The specialised discs can enable the music system to be connected to the Web directly and not only play, but store the music for future use. International data-media storage giant Seagate, which has already shipped two lakh disc drives for use in PVRs, is now scouting for partners in India to market these products.

“The need for storage space and shortage of time are the two things that drive the consumer electronics (CE) segment. Applications like activating the air-conditioner before you reach home or the turning on the TV at a fixed time are the kind of services people are looking for. Hard-disc enabled goods are the only affordable solutions for these,” says Rajesh Khurana, business development manager (Indian subcontinent) with Seagate.

“The products will not be marketed to individuals, but will be sold as an integrated part of consumer electronic products,” he says.

The company plans to strike one such pact with a major Indian CE company in the coming six months, he revealed.

“You will not only be able to activate the air-conditioner five minutes before entering the house, but ask the refrigerator to order for stocks and the washing machine to decide the amount of detergent to be mixed with softener,” Khurana adds.


Calcutta, Aug 4: 
Apple India has chalked out an ambitious project — Operation Spidernet — to strengthen and spread the company’s distribution and marketing network by widening its channel partner base across the length and breadth of the country.

The wholly owned subsidiary of Apple Computer International has identified 30 locations in India and will appoint resellers in these cities by the end of August. It has chosen eight locations in the eastern region — Calcutta, Siliguri, Jalpaiguri, Rourkela, Ranchi, Bhubaneswar, Guwahati and Silchar.

Commenting on the project, Naren Ayyar, managing director, India and Saarc region, said, “This is the first time we are undertaking such a large expansion effort. The aim is to establish an effective geographical presence across the country, mainly in the B and C class cities.” Ayyar adds despite the slowdown in most sectors of the infotech industry, the company has seen a significant growth in demand for iMacs and iBooks, even in the smaller towns and cities.

Commenting on the Calcutta market, he says, “Though Calcutta is classified as an A class metro, the returns from the region are very low, in fact lower than some B class cities. There is, however, a huge potential, which is waiting to be tapped.”

Besides marketing of Apple products, the company is also actively involved in various education initiatives as part of the iLearn project. The company is presently concentrating on Delhi and Chennai and caters to three sections — schools, higher education and research.

“We do not plan to directly impart education. Our objective is to provide cutting edge technologies and solutions to schools and colleges that will enable these institutions to impart the required training to their students,” says Ayyar. “The size and nature of the facilities will depend on how much time and resources the institution is ready to invest.”

Apple plans to set up computerised learning centres in schools across the country under the iLearn initiative. The company plans to set up a wireless laptop-based mobile laboratory with a capacity of 30 to 50 laptops, for tieups with Apple-centric educational institutions, for student and staff exchange.

It has already set up an advanced multimedia lab in Annamalai University, Chennai, with 100 iMacs. The lab will offer specialised courses to engineering students based on the Mac platform.

“We have lined up other initiatives, such as Softcorner Macademia in Delhi, under which learning will be made fun for children aged between 3-13 years. We also plan to set up an Apple Distinguished School at Dr Mahalingam College of Engineering Technology, Pollachi, and advanced job-oriented courses at Dr Avinashilingam College for Women, Coimbatore, among others,” he adds.


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