Mumbai, October 25
A significant reduction in non-performing assets (NPAs) across bank groups notwithstanding, the NPAs of public sector lenders have increased in the non-priority sector whereas bad loans related to priority sector advances have declined over the past 25 years.

This effectively demolishes the commonly held belief that the problem of NPAs in the banking system is mainly due to credit allocation to priority sectors, states a paper `Banking Sector Developments in India, 1980-2005: What the Annual Accounts Speak?’, released by the RBI here.

Pointing out that foreign banks have attracted more funds of a short-term nature in the form of demand deposits, the paper said this could be because “the business class is attracted toward better service offered by foreign banks”.

Public sector banks (PSBs), by and large, still prefer to invest a large portion of their investments in approved securities, even though the SLR (statutory liquidity ratio) requirements have been reduced to the statutory minimum of 25 per cent, the reasons being their risk-free nature and the assured returns the lenders get.

However, private sector banks are exhibiting a different behaviour with a clear preference for investments in other securities and a reduction in exposure to government and approved securities, the paper states.

Private sector banks as a group have invested more than one-third of their total investments in non-SLR securities since 2000, it states, pointing out that this trend has become more marked with the entry of a greater number of private lenders into the market.

On wages, the paper points to a difference between PSBs and foreign and private sector banks. While wages as a percentage of the operating expenses of PSBs is more than 60 per cent, the latter two categories have succeeded in reducing their wage component in operating expenses.

For PSBs, this situation calls for more pragmatic HR policies and proper manpower planning, the paper states, pointing out that private and foreign banks are spending more for other business-boosting measures like image-building, software development, etc.

On the return on assets (RoA) front, the government-run banks have made considerable progress in the post-reforms era but in comparison to foreign banks, their RoA is still lower.

Emphasising the critical role essayed by PSBs in both deposit mobilisation and credit disbursal, the paper points out that they account for nearly 75 per cent of the total deposits mobilised and credit disbursed by all SCBs (scheduled commercial banks).
— PTI

New Delhi, October 25
The BJP Committee on Special Economic Zone today expressed its opposition to the Centre’s policy on SEZs, saying SEZs threatened the domestic industry.

The committee, which would submit its final report in the first week of November, briefed Leader of Opposition L.K. Advani about the apprehensions it harboured about the SEZs, sought to be promoted at the expense of the domestic industry and local farmers.

The committee, headed by Mr M. Venkaiah Naidu, which had interacted with various groups, told Mr Advani that the interactions revealed concerns that SEZs did not allow a level playing field for the domestic industry while taking away fertile agricultural fields from farmers.

He said the BJP was for SEZs for promoting exports and foreign investment, but the way it was being implemented, it threatened the domestic industry and enjoyed special privileges where no normal laws were applicable.

He said SEZs were originally sought to be brought up on 1,000 hectares, but Commerce Minister Kamal Nath had reduced its size to 25 hectares, while the Group of Ministers, headed by External Affairs Minister Pranab Mukherjee, had further reduced its size to 10 hectares.

Some SEZs had been misusing their status to further their real estate value, denying compensation and fertile land to farmers, he added.

The committee would make a comparative analysis of the situation in BJP-ruled states and in other states before arriving at a final viewpoint, he said.

New Delhi, October 25
Steel Authority of India Limited (SAIL) is all set to tap overseas market through external commercial borrowing (ECB) to raise funds to part finance its massive Rs 37,000 crore expansion plan.

“We shall be borrowing about Rs 20,000 crore, which also includes ECB. The remaining shall be funded from internal accruals,” SAIL Chairman S.K. Roongta said.

Asked about timing and quantum for the ECB issue, Mr Roongta said, “The entire investment will be spread over 4-5 years. As and when we require funds we shall approach the market”. Although SAIL is debt-free corporation, there are some debts in the books of SAIL, he said, adding that the company would maintain a debt-equity ratio of 1:1 post modernisation phase.

“We have to start putting financing plan in place by the end of this year particularly the debt portion,” Mr Roongta said.

Terming the current phase of expansion as challenging, the SAIL Chairman said all five integrated steel plants for the first time would undergo modernisation both in terms of size and scope simultaneously.

Asked whether SAIL was fearing a situation of glut in the steel market in the coming years in view of large capacities having been announced, Mr Roongta said, “There was an over capacity in the global steel market. However, a new capacity is emerging and the country will generate enough demand in the near future”. — PTI

New Delhi, October 25
The Railway Ministry’s plans for greater private participation has hit a major roadblock, with the Industry Ministry questioning the move to award licences to private companies for container services without amending a law that mandates only PSUs to run these operations.

According to the Industries (Development And Regulation) Act, 1951, and the Industrial Policy, only the public sector can run railway transport services, whether passenger or freight.

In fact, as per the industrial policy statement of 1991, railway transport was in the list of eight sectors, which also included atomic energy, defence and minerals, reserved for public sector firms.

“Giving licences to private players, whether domestic or foreign, require an amendment to the Act and the policy. This has not been done so far,” a senior official in the Department of Industrial Policy and Promotion (DIPP) said.

Further, though the FDI policy might not explicitly bar foreign investment in railways but since it was reserved for the public sector no overseas investment could flow in, the official said.

The Railway Ministry had sought comments from the DIPP early this year on allowing private container operators. The official said the DIPP would send its reply shortly.

The Industry Ministry’s objections could further delay the launch of container services by private companies, which were initially expected to start by March this year but was put off to August and subsequently to September.

So far, the Railway Ministry has given licences to 14 companies, including Mukesh Ambani’s Reliance Infrastructure Leasing and Rajeev Chandrasekhar-led Indian Infrastructure and Leasing. The ministry had raised Rs 540 crore in February as licence fees.

Other companies that have been allowed in the freight movement business include Adani Logistics, P&O Ports, Gateway District Park Ltd and Pipavav Rail Corporation Ltd.

The private operators would run container trains in competition with the state-owned Container Corporation of India (CONCOR), till now the sole operator of rail container traffic in the country.

South Korean steel giant Posco, along with some other private firms, had also signed an agreement early this month with state-run Rail Vikas Nigam Ltd for building a railway line in Orissa.

Railway Minister Lalu Prasad had earlier said with the liberalisation of container policy, private players were expected to invest about Rs 2,000 crore in the manufacture of wagons and terminals.

The ministry had early this month also set up a high-level panel to chalk out the modalities for effective implementation of public-private partnership in specific and identified areas. — PTI

Mumbai, October 25
Lord Krishna Bank (LKB) today announced that employees at all its branches had resumed work. The bank branches are wholly operational at full strength all over India, including Kerala.

In a statement here, Managing Director and CEO of Lord Krishna Bank B. Swaminathan said: “The bank is fully committed to looking after the employees’ interest, which was one of the key considerations for the merger. The management stands committed to the one- time increment to all existing employees of Lord Krishna Bank that was announced earlier.

“In the recent past, employees of Lord Krishna Bank in Kerala were on strike protesting against the proposed merger of Lord Krishna Bank with Centurion Bank of Punjab. The management of the bank held discussions with the striking employees in order to get them to resume their duties, reiterating the assurance that had been made in the scheme of amalgamation that there would be no retrenchment of staff and there would be no closure of any rural branches. — UNI

Mumbai, October 25
All major markets, including the Bombay Stock Exchange, the National Stock Exchange and the foreign exchange (Forex), money market and commodities, including oilseeds, pepper, metals and solvent markets - remained closed today on account of “EId-ul-Fitr”.

The bullion and sugar markets were, however, open today.— PTI 

New Delhi, October 25
With high raw material cost and increased competition weighing heavily on its bottomline, Hero Honda Motors’ today reported a 9.24 per cent dip in net profit at Rs 216 crore in the July-September quarter and unveiled two new variants to drive growth.

The company’s turnover, however, went up by 3.6 per cent in the second quarter at Rs 2,289 crore against Rs 2,209 crore in the year-ago period.

Hero Honda, which launched two bikes this fiscal, announced the launch of two new variants — the new ‘Glamour’ and ‘Passion Plus’ limited edition.

It had already launched ‘Glamour FI and CBZ X-treme models this fiscal and had announced that the company would launch eight new bikes, including variants in 2006-07.

Enaged in a cut-throat competition with rival Bajaj Auto, the company saw EBIDTA margins come down to 13 per cent against around 15.4 per cent in same quarter last fiscal.

“The impact on operating margins has been due to increased inflationary costs in raw materials like steel, aluminium and rubber,” Hero Honda Managing Director Pawan Munjal said after the Board of Directors cleared the Q2 results.

The company’s net profit in the first half of this fiscal stood at Rs 453.71 crore against Rs 442.37 crore in the same period last fiscal. Total turnover in the April-September 2006 period stood at Rs 4,706.09 crore against Rs 4,216.99 crore in the first half of 2005-06.

“Both these new models will further enhance sales growth for Hero Honda’ in the de luxe segment,” the company said.