New Delhi, September 30
As the financial crisis deepens in the US and Europe, the Indian government swung into action today to cease any further loss of confidence of investors, stock market players, exporters, and businessmen. There has been a three-pronged attack by the RBI, SEBI and the finance ministry. The RBI is likely to inject more liquidity into the system so as to prevent any credit crunch in the coming days. Market regulator SEBI is keeping vigilant eye on short-selling and on the settlement mechanism. And to soothe the panic that would have otherwise cause a carnage in the stock market, the finance minister has assured that they are keeping a round-the-clock watch on the markets and will take necessary steps to tweak regulations, if needed.

In Mumbai at the RBI headquarters, a meeting was held by RBI Governor, D Subbarao, along with PSU banks and private banks chiefs. Among those present included chairmen of SBI, Bank of India, Bank of Baroda, Canara Bank, and Union Bank of India. The meeting also had representatives of Axis Bank and Citibank India.

The banks have made a representation to RBI stating that they need more cash to be released in the system to avert liquidity crisis.

The demand for cash is visible in the huge borrowings by banks from RBI. The banks collectively borrowed a record Rs 90,075 crore from the central bank on Monday. The borrowings from the RBI have been in the range of Rs 50,000 crore-Rs 80,000 crore over the past couple of weeks. Further, the bankers indicated that they expected the demand to rise in the coming quarters.

“A number of corporates have lined up for credit and thus we will need to look at options to increase liquidity,” pointed out a senior banker. Demand for liquidity is in the context of increase in credit and rising cost of funds, which has risen by 26 per cent year-on-year as against 20 per cent projected by the RBI.

Another senior banker suggested that RBI should once again allow banks to have floating reserves so that such reserves could be used during bad times and disclosure on the same can be made in their balance sheet. RBI had discontinued the practice of allowing banks to have floating reserves some time back.

Meanwhile, in Delhi, SEBI chief C.B. Bhave said once the crisis was over, India would come stronger and the balance would be in the country's favour. He also said in the future, there would be more open market in the recently launched currency futures.

“Indian market is resilient and the clearing system has proved to its ability to deal with stock market fluctuations,” Bhave said, adding that clearing and settlement mechanism of the stock exchange was a time-tested mechanism, which had been tested in the times of great volatility.

Expressing confidence that rules of short-selling have not been violated, SEBI chairman said he had no apprehensions that institutions were short-selling. He said institutions could short-sell if they had borrowed in lend-borrowing facility but our borrowing was negligible.

“If there is any evidence that any institution has circumvented our short-selling rules, we will take severe action, and the present regulations are adequate and SEBI can review the market rules, if required,” he said.

In the meantime, finance minister P Chidambaram said: “Indian market is sound and attractive and there is nothing to worry and has promised to take necessary action, if needed. We are suffering the consequences of turbulence around the world.”

Commenting on the FIIs’ behaviour, he said they were selling because they had got payment obligations, but some FIIs were also buying, and perhaps, more would buy as India was still a well-regulated and an attractive market to invest.

With international economy facing uncertain times, Prime Minister Manmohan Singh today underlined the urgent need to restore confidence in the functioning of global markets and in the collective ability to coordinate macro-economic policy in the major economies in a manner conducive to the restoration of global growth.

Using the India-EU Business Summit forum to share his views on the economic meltdown that has sent shock waves across the world, Singh regretted that just as many developing countries were beginning to benefit from the positive potential of globalisation, the tide has turned and the economic prospects have deteriorated. The crisis in the financial markets had cast its shadow on global liquidity in a big way.

Asserting that India had weathered the current credit crisis facing the global banking and financial sectors, he argued that the Indian economy would grow between 7.5 per cent and 8 per cent despite the slowdown in the world economy.

Reassuring the European businesses that India had not been affected by the global economic crisis, Singh said his country would continue to provide them a stable platform.

''The Indian market is changing rapidly. The middle-class is expanding. Rural consumers are shifting from commodities to branded products. There is growing urbanisation and a surge in demand for consumer durables and luxury brands. The upside for growth is enormous, with rising incomes continuing to support demand,'' the Prime Minister noted.

On India-EU cooperation, the Prime Minister identified seven areas in which the two sides could collaborate extensively: investments in infrastructure, including power generation, cooperation in services, skill development, solar energy, nuclear commerce, agricultural productivity and research and space.

Snubbed by his own party in Congress the day before, President George W. Bush on Tuesday urged lawmakers to approve his financial bailout package and warned a failure to do so would mean a “painful and lasting” economic hardship for the United States.

On Tuesday, the House of Representatives rejected Bush’s $700-billion plan to rescue the financial system. Most Republican lawmakers voted against the bailout.

Reiterating he was “disappointed” with the outcome, Bush said, “but I assure our citizens and citizens around the world that this is not the end of the legislative process.”

“Our country is not facing a choice between action and the smooth functioning of the free market. We are facing a choice between action and the real prospect of financial hardship,” he warned. Urging lawmakers to act, Bush said, “Our economy is depending on decisive action from the government.”

The House rejection of the bailout on Monday sent the Dow Jones Industrial Average down a record of 778 points. On Tuesday, the Dow gained more than 200 points in early trading soon after Bush urged lawmakers to try again to pass a bailout bill.

The House is not expected to take up the bailout until later in the week as many lawmakers have returned home to celebrate the Jewish new year.

“The consequences will grow worse each day if you do not act,” Bush chided lawmakers who opposed the bailout. “Our economy is depending on decisive action from the government... This is what elected leaders owe the American people.”

On Monday, Treasury Secretary Henry M. Paulson Jr. tried to allay concerns in the markets saying, “I will continue to work with congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people by limiting the prospects of further deterioration in our economy.”

“We've got much work to do, and this is much too important to simply let fail,” Paulson said.

In perhaps a glimmer of hope for Bush, a senior Republican Sen. Mitch McConnell of Kentucky said, “We’re not leaving town till we get it fixed.”

New Delhi, September 30
As the US credit crisis deepens with the US Congress rejecting the bailout package for financial sector, The Tribune spoke to various sections of the Indian economy to assess the impact of crisis on business, economy, stock market, and exports.

PNB chairman K.C. Chakrabarthy said the bailout plan would definitely be approved in the days to come. “Yesterday, it was rejected because there was very little time to debate, but this situation will be sorted out. There will not be much impact on the banking sector as we follow strict regulations, besides our economy is insulated from these shocks as we are not a fully open economy. But going further, one has to be cautious by not taking any risky decisions of investments. As regards our big borrowers like corporate houses, there could be some who would have taken risky bets in the markets or could be facing losses in derivatives or export markets. But these would be handful and they will have to face the consequences,” he said.

Dr Rajiv Kumar, director and chief executive, ICRIER, said: “I think the bailout package should go through and this will stop the fear factor that is prevailing in the US economy and the banks will once again start lending to borrowers.

“The impact on India could be bad and we predict a growth of not more than 7.8 per cent in the present year. But we have a grim prediction for the next year where we predict the growth to be barely 7 per cent in 2009-10.”

Dr L.K. Malhotra, president, PHD CCI, said: “India may not be able to remain untouched by the financial turmoil in the US. The nation’s capacity to finance development is likely to be adversely affected. Exports from India are also likely to be hit if major economies go into recession.

“The chamber endorses the finance minister’s suggestion to revamp market regulations to deal with the likely adverse impact of the global financial crisis. At a time when the global financial markets are in great distress, it is necessary for the government and the regulatory authorities to come forward with imaginative package to cushion damage from the worst credit crisis since the Great Depression of the 1929s.”

Ganesh Kumar Gupta, president, Federation of Indian Export Organisation (FIEO) said: “The rejection of bailout package will definitely impact the Indian exporters as US is a big export market for us. There could be lot of trouble and maybe a downturn for Indian exporters exporting to the US and Europe, considering that both these economies are likely to suffer prolonged recession. Besides, there is an additional problem created by the Indian government from October 1 by withdrawing interest subvention (preferential interest rate) for exporters.”

P.K. Agarwal, president, Bonanza Portfolio Ltd, said: “We are optimistic that despite the fact that there is downturn in the West, there could be a new wave of demand and consumerism likely to hit India. There could be deep structural problems in the US, but in India we do not have such a situation. There will be impact and would be for a few days to come, but finally economic fundamentals will assert themselves, resuming a growth path.” 

Mumbai, September 30
The global financial crisis had its reverberations in India after rumours that ICICI Bank was in trouble caused scores of depositors to flock to the bank's ATMs to withdraw cash. Being a bank holiday, none of ICICI Bank's branches were open for business.

As long queues formed outside the bank's ATMs, the RBI and finance minister P Chidambaram stepped in to assure depositors about the bank's solvency. While the apex bank provided liquidity to ICICI Bank to replenish its teller machines in the event of a shortage, Chidambaram said in New Delhi that no Indian bank, least of all ICICI, were under- capitalised.

Reports that ICICI Bank's exposures to securities issued by troubled American institutions like Lehman Brothers had already hammered down the bank's stock prices over the past several trading sessions.

Today, online message boards and discussion forums were abuzz with messages that chain SMSes were being sent to people right from morning that ICICI Bank was going bust. Those claiming to have received such messages were spread across the country from Mumbai and Ahmedabad in western India to Coimbatore in the South.

However, the panic subsided after the assurances given by the government agencies. But long queues remained outside several ATMs in many places.

ICICI Bank managing director K .V. Kamath said vested interests were spreading rumours about the bank for the past several weeks. "First they said ICICI Bank insiders were offloading their holdings. The market regulator should find out who is behind the rumours," Kamath said. He went on to say that the bank was financially strong.

He added that ICICI Bank UK Plc, the wholly owned subsidiary of the bank, had zero exposure to US sub-prime credit crisis and zero non-performing loans. The market welcomed the statements and ICICI Bank's stock rebounded strongly towards the second half of trading today. Its shares surged 8 per cent at the end of trade. ICICI shares opened at Rs 493.3 and closed at Rs 534.85.

The bank said it had an exposure to the tune of 57 million euros in senior bonds of Lehman Brothers Inc. However, this amounted to less than 0.1 per cent of the bank's total assets.

Kamath went on to say that the bank had total assets of 484,000 crore (over $105 billion) and was not on the verge of a crash.

Gwalthai (Bilaspur), September 30
The Rs 3,500-crore Kolkata-based SPS Steel and Power group is all set to increase its total steel manufacturing capacity from 1.6 million tonne to 2 million tonne in the next two years. The group is also planning to set up a cement plant in Himachal Pradesh and foray into real estate business in a big way.

This was revealed by CMD of the group, Bipin Kumar Vohra, after the group's new steel plant was inaugurated here today by the Himachal Pradesh Chief Minister Prem Kumar Dhumal. The plant, set up with a capital investment of Rs 125 crore, will have a capacity to produce 0.3 million tonne of billets and 2.60 lakh tonnes of rolled products. While setting up this plant, the SPS Group had acquired the steel division of Suraj Fabrics Industries here, which already had a capacity of 1 lakh metric tonne of billet and 1.20 lakh metric tonne of rolled products (rebars).

"With this, we become the largest mini steel plant in North India in terms of single-brand production under one unit," he said.

The CMD also requested the Chief Minister to allot them another 10 acre of land here so that they could expand their facility and start manufacturing structurals (angles, channels and squares). He said as the group focuses on consolidating its diverse businesses in the coming two years, after the capacity expansion, they are hoping to increase the group's turnover from the present Rs 3,500 crore to Rs 6,000 crore by 2010-2011.

"We are in the process of commissioning our new integrated steel plant at Jharsuguda in Orissa by next year. This plant will manufacture everything — from iron ore to steel and will boast of a 180 MW of captive power generation. Though the first phase of this plant is complete, the entire integrated plant, with an annual capacity of one million tonne will be commissioned by next year," said Vohra. He said the total investment for the Gwalthai and Jharsuguda plants was over Rs 900 crore.

He said the company, along with Tata Sponge Iron, have been allocated a coal block by the Centre at Radhikapur in Orrissa for captive consumption and this would go onstream by the end of 2009. "We are also in talks with Orissa government for allocation of an iron ore mine with reserves of 30 million tonne. We are also in talks with an Indonesian company for taking up a coal mine block there. Recently, we had acquired a private iron ore mine in Orissa, which has eight million tonne reserves," he said.

He added that they had already launched their real estate business in West Bengal and were planning to enter into other small towns in Orissa and West Bengal. 

Bangalore, September 30
GE Healthcare, a $17-billion healthcare arm of General Electric, will be investing another $50 million for infrastructure development at its John F Welch Technology Centre, GE Health Care plant, here.

Talking to mediapersons, V. Raja, president and CEO, GE Healthcare, during the Early Health summit organised here, stated that the JFWTC was a $120-million facility and another $50 million would be pumped into the centre.

GE Healthcare's Bangalore plant is spread over 15,000 square yards, where the company is manufacturing high-end x-ray machines, ultrasound, MRI scan machines etc. The company has a 30 per cent share in the international market for these products. Majority of the products manufactured here are exported across its centres outside India. Other than the complete products, the Bangalore centre is also manufacturing parts for its products manufactured outside India.

During the summit, the company also announced new healthcare initiatives in collaboration with state governments and NGOs working in the field of providing healthcare to the poor and rural population. The company has tied up with the NICE Foundation for sustainable healthcare in maternal infant care, a mobile cardiac screening in association with Manipal Heart Institute and partnered with Grameen Health to help address health needs of 4 billion people globally living on annual income of less than Rs 1 lakh.

GE and Manipal Heart Institute jointly created a mobile cardiac screening program model to take early detection to the doorsteps of the patients. 

Mumbai, September 30
Reliance Communications (RCom) has contracted group company Reliance Infrastructure to develop a SEZ at Dhirubhai Ambani Knowledge City (DAKC) in Navi Mumbai, its chairman Anil Ambani said on Tuesday. 

Speaking at the fourth AGM, Ambani said the company was developing part of the 132-acre campus at DAKC, on the outskirts of Mumbai as a SEZ focussed on IT and IT-enabled services with an estimated cost of Rs 1,000 crore.— PTI

BRIEFLY

CPI-IW up 2 points
Shimla: All India Price Index Number for Industrial Workers (CPI-IW ) on base 2001-100 for the month of August increased by two points and stood at 145 points. During August, the index recorded a maximum increase of 10 points in Godavarikham centre, nine in Gunture centre, six in Muger Jamalpur centre, five in two centres. — UNI

Reliance Money foray
Mumbai: Anil Dhirubhai Ambani Group Reliance Money on Tuesday said it would foray into the investment banking sector and has obtained a merchant banking licence from market regulator SEBI. “While the main focus of the industry has been on large caps, we see a huge opportunity in serving the small and mid-sized segment, currently being under-serviced," Reliance Money CEO Sudip Bandyopadhyay said.— PTI

Gold surges by Rs 300
New Delhi: Tracking strong global cues gold prices on Tuesday surged by Rs 300 to close at Rs 13,400 per 10 gram in the bullion market here on brisk buying by retailers with the on the first day of 'Navratras'. — PTI

Oil PSUs cut ATF price
New Delhi: For the second straight month, state-run oil firms on Tuesday slashed aviation turbine fuel (ATF) prices by over 5 per cent in step with fall in international oil prices. ATF or jet fuel price in Delhi were cut by Rs 3,202.27 per kilolitre to Rs 56,447.80 per kl with effect from midnight tonight, an official of Indian Oil Corp, the nation's largest fuel retailer, said. — PTI

DLF's buyback offer
New Delhi: Country's largest real estate firm DLF is likely to start its Rs 1,100-crore buyback offer next week. At a meeting held here on Tuesday, DLF's board of directors approved the public announcement for the buyback that entails start of the offer next week, company sources said.— PTI

Leyland, John Deere in pact
Mumbai: Hinduja Group's flagship firm Ashok Leyland on Tuesday said it has entered into a joint venture with US-based agricultural equipment maker John Deere for manufacturing and marketing of construction equipment. The JV would start production by early 2010 and would supply products to both domestic and overseas markets.— PTI

RCom offer
Chandigarh: Reliance Communications (RCom) has launched special caller tunes for Navratri and Durga Pooja. The Navratri special caller tunes are available free for 10 days. Subscribers can set the caller tunes at a nominal rate of Re 1. — TNS