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Monday,
September 29, 2003, Chandigarh, India  
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J&K
Bank setting up MF subsidiary, says Khan Reliance
to invest 10,000 cr in Gujarat India to
be sourcing hub for auto majors IMF to
stand by India in crisis
Market
gains on strong FIIs’ inflows |
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Get IT
rebate on house loan interest
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J&K Bank setting up MF subsidiary, says Khan New Delhi, September 28 Among other things, this involves the establishment of a full-fledged mutual fund subsidiary which should be operational by the end of this financial year (2003-04). "We are initially setting up a mutual fund distribution services agency which will eventually be converted into a full-fledged subsidiary of the bank offering its own debt and equity linked products. The subsidiary should be in place by March 2004 and will be operated as an independent profit centre", J&K Bank's Chairman M.Y. Khan told The Tribune in an exclusive interview. The bank, in which the Jammu and Kashmir Government holds 53 per cent equity and is also the banker of the state government, is hoping to breach the Rs 30,000 crore mark in its total business by 2005. "As on March 2003, our business turnover was Rs 22,686 crore. This is a staggering jump from the figure of Rs 4,259 crore in 1996. We think we are on course to reach the level of Rs 30,000 crore within two years", Mr Khan said. The bank has set a target of clocking profits of Rs 500 crore by 2005 from the current level of Rs 425 crore. Buoyed by such high growths, which Mr Khan thinks is sustainable, at least in the medium term, the bank is in the process of formulating a five-year business plan starting from 2005 to 2010. "We are shortly going to appoint external consulting agencies for drafting the business plan. The broad roadmap of this plan will envisage a growth rate of 15 to 20 per cent per annum", the J&K Bank chairman said. Mr Khan was hopeful that the banks business, especially credit offtake, from the trouble-torn state would improve significantly with tourism and infrastructure likely to act as the major engines of growth. Presently, 40 per cent of the bank's business is being generated from within the state. "Credit dispensation is a problem in Jammu and Kashmir. Presently the credit-offtake from the state is about Rs 3,200 crore of the total loan portfolio of Rs 8,000 crore. But with tourism picking up and many big infrastructure projects in the pipeline we are expecting a significant improvement in credit off-take from within the state". He said that more than 1,000 beneficiaries of houseboats have been granted financial assistance amounting to Rs 18 crore. "We have also liberalised the scheme for financing tour operators and have allowed remission of interest to a large number of such parties". Mr Khan indicated that the a public issue launch was definitely part of the overall plan, but denied that the IPO will hit the market in the immediate future. "The IPO is part of the overall business plan. But it is not definitely on now. It may hit the market next year. The basic size of the IPO will be of Rs 50 crore plus the additional premium. Therefore, with five crore shares and a high premium we could be in a position to mop up upto Rs 1200 crore. Nothing has been finalised though", the J&K Bank Chairman said. The funds raised through the IPO will be used for lending towards infrastucture projects with longer gestation lags, he said. On the declining interest rates, he said it has "almost stabilised. But it will not harden anymore", Mr Khan felt, adding that that recent reduction in farm lending rates will affect bank incomes but "not too much". While banks have been allowed the flexibility of fixing sub-PLR rates, the benefits have not really trickled down to the farm or the small scale sector. The biggest beneficiary of this has been the real estate sector, where housing loans have substantially come down. Mr Khan attributed this phenomenon to the "high risk" element in agricultural lending. "For practical purposes, we cannot sell agricultural land which has been kept as mortgages. Therefore, effectively, we cannot implement the Securitisation Act even though banks have been armed with more teeth following this legislation". He, however, cautioned that undercutting of the interest rates was "not good for banks. There was massive swapping taking place for large corporate loans and the Indian Banks Association (IBA) cannot do anything about it". Mr Khan said that the reduction in interest rates have brought down the costs of production for corporates "but unfortunately none of this has been passed on the consumer". "For instance, corporates today are in a position to negotiate lower rates of interest by hopping from one bank to another. But this has not translated into lower prices of commodities or any services", he pointed out. Regarding the proposed bank privatisation, he said that once the legislation comes into force, it will "increase the operational freedom of public sector banks" and said that public sector banks will be able to withstand the onslaught of competition unleashed by private sector banks.
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Reliance to invest 10,000 cr in Gujarat
Ahmedabad, September 28 Speaking at ‘Vibrant Gujarat Global Investors Meet’ here, Group Chairman Mukesh Ambani said “we plan to invest Rs 8,000-10,000 crore in Gujarat over the next three years”. The money was likely to be invested in energy and broadband network projects, he said adding that the company also planned to tap the recent oil finds in the Krishna-Godavari basin in Andhra Pradesh to generate cheap energy in Gujarat. He said the company had already invested more than Rs 50,000 crore in the state, including Asia’s largest oil refinery near Jamnagar. On the company’s information technology (IT) initiatives in the state, he said the digital broadband network had already reached all major cities and towns and efforts were underway to connect all villages. Mr Ambani cited several factors which added to the overall investment climate in the state, including industrial relations and business acumen of the
people and its potential to play a lead role in building as a strong leader in IT and communications. “More investment in Gujarat makes more business sense,” he said lauding the spirit of recovery and
resilience of the people of Gujarat.
— PTI
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India to be sourcing hub for auto majors New Delhi, September 28 “The Indian automotive industry is likely to maintain the growth momentum picked up in 2002-03. India is likely to increasingly serve as sourcing base for global automotive companies and exports are likely to gain increasing importance,” the report “Indian Automotive Industry” said today. The passenger car segment would grow at the compounded growth rate (CAGR) of 8 per cent during 2004-07, which might vary across segments, it said. The report pointed out “growth in the medium term is expected to be led largely by the compact and mid-range segments. Although the mini segment is expected to sustain volumes, it is likely to continue losing market share”. ICRA’s analysis on the auto sector said the passenger car market in the country was inching towards cars with higher displacements. The sports-utility-vehicle (SUV) category, which was getting crowded everyday, would witness intense competition as many SUVs had been competitively priced, it said. Global automakers like Honda, Suzuki, General Motors and Hyundai had launched their premium SUVs in the market to broaden their portfolio and create product excitement in the segment estimated at about 10,000 units annually. In the two-wheeler category, motorcycles would clock 11.5 per cent rise during 2004-2007 over its siblings-scooters and mopeds, the ICRA report said. While scooters sales would decelerate, mopeds would ride southward, it said adding the category would further witness segmentation into “various product and positioning platforms”. It said overseas market would present huge opportunities for the two-wheeler makers. Commercial vehicles were likely to grow at a CAGR of 5.2 per cent on the back of a spurt in industrial activities and government’s emphasis on infrastructure development and the easy availability of finance. Heavy commercial vehicles market would rise at 5.5 per cent, sales of light buses and trucks would achieve 4.7 per cent growth. Demand for multi-axle trucks, offering better economy in terms of the transportation cost, was likely to get a boost from the national highways development programme (NHDP). For tractors, the report pegged growth at 4.6 per cent. The states with high per capita income and large number of land holdings had the best potential for tractors in the medium term. For the longer term, any sustained demand would hinge on the ability of tractor manufacturers to develop new models meeting specific customer requirements, ICRA said. The report said issues like downstream participation, vendor management, products range and economies of scale would be of paramount importance to auto makers.
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IMF to stand by India in crisis
Dubai, September 28 “It is crucial for crisis prevention to build trust that countries with sound policy frameworks will be proactively supported by the fund in their efforts to resist contagion”, according to a report on IMF’s policy agenda. Pointing out that even in the face of the best policy advice, crisis could occur, it said the fund would continue to play a key role in their resolution. The IMF report said the Fund was in the process of exploring how best to achieve this objective and to this end it was reviewing the Contingent Credit Lines (CCL) facility, which was currently scheduled to expire in November, 2003. “It is important that we maintain our commitment to help countries with good policies to become more resilient to crisis”, it says. “In response to the request of the International Monetary and Financial Committee (IMFC), the Fund’s current efforts on crisis resolution focus on promoting the inclusion of collective action clauses in international sovereign bonds in jurisdiction where they are not yet the market standard”, it said. The IMF’s current effort also focused on contributing to initiatives aimed at formulating a voluntary code of conduct for sovereign debtors and their creditors and on issues raised during the work on a sovereign debt restructuring mechanism that were of general relevance to the orderly resolution of financial crisis, the policy agenda paper said. The Fund was promoting the use of Collective Action Clauses (CAC) through its surveillance activities and active dialogue with issuers and private market participants, it said adding the first half of 2003 witnessed a turnaround in the use of CACs in international sovereign bonds governed by New York law, which typically did not contain these clauses. Mexico, Brazil and South Africa were among the emerging market countries that had recently issued sovereign bonds under the New York law with CACs, and CACs had also been included in the new bonds resulting from Uruguay’s recent debt exchange. It said a number of advanced economies had also taken steps to introduce CACs in their international sovereign bonds, including Austria, Greece and Iceland.
— PTI
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by Lalit Batra Market gains on strong FIIs’ inflows Markets staged stunning come back this week as the bulls resumed their buying spree amid immense volatility. The 30-share BSF Sensex surged 3.9 per cent to settle at 4,382.57. The S&P CNX Nifty jumped 64.80 to 1,386.95. Volatility in the cash market emerged on unwinding of positions by traders in the derivatives markets. A sharp and swift rally over the last few months has set off his volatility. On an overall basis, several stocks might have seen their highest levels for the medium-term and therefore any upmove will be very stock-specific and not across the board. For the long-term, we are in the final stages of a 5-month long rally. The 4465 level is a major resistance as it was the high seen around the time of the 2001 crisis in the market and therefore might not surpassed significantly. It is also the 50 per cent retracement of the fall in the Sensex from 6150 to 2596 between 2000 and 2001. If 4465 were surpassed, the next major retracement level would be at 4780, which are the 61.8 per cent retracement of the fall in the Sensex from 6150 to 2596. FII’s inflows continue to be strong. The foreign funds have pumped in more than Rs 35 bn this month so far, the highest monthly investment by the FIIs in over 30 months. Though the second quarter results are the next major trigger for the market, markets will also be eyeing the meeting of the cabinet committee on divestment (CCD) which is scheduled on next Friday. CCD is expected to decide on the government’s future course of action after the Supreme Court recently stayed the divestment of HPCL and BPCL stating that the approval of parliament is needed for the divestment of these PSU’s.
HPCL HPCL gained 3 per cent amid reports that the Disinvestment Minister has said that the Centre could consider a review of the Supreme Court judgement on the stake sale of HPCL and BPCL. HPCL, which nosedived after the Supreme Court stayed the divestment of HPCL and BPCL, seems to be good long-term investment at current levels. Though the delay in divestment has skewed the risk-return equation in the short run, but the company has strong fundamentals and company’s focus on profitability and return on investment would definitely play out in the long run. HPCL is currently in the process of implementing several projects, which have a strategic significance, which include investments in the Mumbai and Visakh to upgrade the quality of auto fuels to Euro III norms as well to improve yields. Investors who have the patience for a long haul can add this fundamentally strong scrip to their portfolio. Cement Cement scrips surged last week on the back of talk of a further hike in cement prices around October-November 2003. All through the monsoon, cement prices off-take was sluggish due to low demand as constriction activity took a back seat. Weak cement prices and expectations of lack-lustre second quarter results prompted cement scrips to come off the higher levels over the last few weeks. But after leading producers raised cement prices by Rs 3-5 per bag in Mumbai the cement counters witnessed a flurry of activity. Investors should not be tempted to buy these cyclical stocks for short term but should consider the company’s long term prospects before investing in cement companies. Though the long term prospects of cement industry look good but investors should stick only to the top-notch companies in the sector for long term gains.
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by R.N. Lakhotia Get IT rebate on house loan interest
Q: I want to know about the rebate on Housing Loan. We both husband and wife are bank employees and are co-borrower of housing loan from a bank. Title dead of the property is held jointly with equal proportion of share. Repayment of loan is from the salary of my wife. My questions are: Can I take 100 per cent benefit of interest? What would be quantum of deduction that both can claim in respect of interest and principal? Can my wife take 100 per cent benefit of principal amount repayment of loan from her salary? What other declarations have to be produced to the I.T. authorities or to employers. Under what sections, I can take rebate of housing loan. — Krishan Kumar, Moga Ans: In respect of the Housing Loan taken by you, you are eligible to claim two tax benefits. In the first stage, you will be eligible to claim deduction in respect of the interest on Housing Loan taken by you. This deduction is available as per Section 24 of the Income-tax Act, 1961. The maximum amount of deduction per annum is Rs 1,50,000. Similarly, in respect of payment for purchase or construction of residential house including part repayment of the instalment, you will be eligible to claim tax rebate under section 88 of the Income-tax Act, 1961. The maximum amount on which such rebate can be claimed is Rs 20,000 per year. Both husband as well as the wife can take advantage of the above provisions independently. The husband can take 100 per cent benefit of the interest payment only when the interest is paid 100 per cent by him. In case wife has made payment of the interest she can avail the full benefit. However, the best and correct planning would be to claim the benefit of interest payment pro-rata to the ownership of the property for which the payment of interest should also be made in equal proportion.
Dividend income Q: I have been holding 300 shares of I.T.G. Ltd. for more than four years. These gifted to me by my father. I now intend to gift these shares to my wife, who is a household lady and income-tax assessee. Dividend income is now exempt from income-tax. Will it be in order, if dividend income accruing on the aforesaid shares is not transferred to me. Kindly guide. In case my wife sells the shares transferred to her after more than years no capital gains tax will be payable. Kindly advise. — S.L. Sareen, Ludhiana Ans: It is true that dividend income is exempt from tax but if you make gift of the shares to your wife and later on she were to sell the shares, then the capital gain arising would be to your account. As per section 64 of the Income-tax Act, 1961 direct or indirect transfer to the spouse is liable to clubbing.
IT recovery Q: What is block period, block assessment, peak theory and theory of talescoping. Can income-tax officer use coercive measures to recover the amount during stay got from commissioner. — Adesh Agnihotri, Tarn Taran Ans: The block period concept is being used in the case of income-tax raid. The block period is now six years as well as the current year upto the date of search. The Income-tax Officer generally would not use any coercive measures to recover the amount which the assessee has got stay from the Commissioner. In case coercive measures are adopted by the Assessing Officer, it is advisable to contact the Commissioner.
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Inflation up Low-cost PC |
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Powered by annual growth rate of
over 20 per cent, banking major Jammu and Kashmir (J&K) Bank is
working on an exhaustive business plan aimed at converting itself into a
"financial supermarket".
