New Delhi, October 20
After the announcement of a first cut in repo rate since March 2004, finance minister P. Chidambaram today expressed the hope that the step would enthuse investors to see through their investment plans. He said the repo rate reduction was consistent with the objectives of moderating inflation as well as ensuring satisfactory growth rate.

“The cut in repo rate will be beneficial for many sections of the people, especially borrowers as well as investors. This is our hope (it) will enthuse investors to continue to take forward their investment proposals,” he said.

Meanwhile, Planning Commission deputy chairman Montek Singh Ahluwalia said, “repo cut is very important signal, banks will read the signal and it will lead to money being available and some moderation in interest rates”. He also added that there would be a significant decline in inflation in coming two months.

Finance minister also stated that India was feeling the ripple effects of global financial crisis though it might not have directly affected the country. “We are moving at a calibrated pace. Our banking system is very strong and our banks are well capitalised and well regulated,” he added.

“Credit crunch that the world faces has also impacted us. We have taken a series of measures to infuse greater liquidity and to restart the process of credit,” he said. “But I am confident that the economy will grow between 7 and 8 per cent,” he added.

New Delhi, October 20
Welcoming the RBI's decision to cut repo rate, CII director-general Chandrajeet Banerjee said “this is a step in the right direction and we are thankful to the RBI Governor for agreeing to this suggestion made by CII in view of the credit crisis that was starting to manifest in the Indian system, following the global liquidity crunch.”

“The credit crunch that has been visible in India of late has been the result of twin problems of lack of liquidity in the system and the cost of credit owing to the steep interest rates,” it said. In the past one week, the RBI and the government have responded to the situation by injecting additional liquidity to the tune of Rs 125,000 crore and also now cutting interest (repo) rate. These were among CII's various recommendations to put the economy back on growth track and the CII director-general pointed out that this demonstrated the agility and responsiveness of Indian policy makers.

A dollar fund needs to be created out of India's forex reserves, which could be worth about $7-8 billion. This fund would be useful in buying Indian assets and thereby creating stability and liquidity in the markets. Similarly, another Rupee fund needs to be created with contributions from the RBI, the government and participating banks, with a corpus of up to Rs 30,000- 40,000 crore, which could be parked with a body like LIC and can be used to inject momentum in the Indian stock markets.

CII has also suggested a separate corpus to be created for lending to SMEs, as they stand to get disproportionately hurt by the non-availability of credit. While the RBI could look at reducing the risk weights for lending to SMEs, the ministry of finance and the RBI could set up a SPV, which would have to ensure that SMEs are allowed credit at close to PLR rates.

Another industry body, Ficci, welcomed the RBI’s move to reduce the repo rate stating that it would definitely serve as a confidence booster for the financial sector as well as the real estate sector. “This move is in alignment with the Ficci suggestions to the liquidity committee. Hopefully, the real estate sector will now be able to access bank finance at a relatively lower cost. The industry body has suggested that instead of making step by step announcements, there is a need for a big bang approach with deeper cuts at one stroke in repo as well as bank rate in order to signal lower rates of interest to the banking sector”, said Dr Amit Mitra, secretary-general, Ficci.

In addition to this, Ficci has also suggested lowering of SLR rates and utilisation of a small portion of forex reserves for lending through banks to corporates for meeting their credit requirements and overcome the current liquidity crunch.

Industry body Assocham’s president Sajjan Jindal has welcomed the RBI’s decision to cut the repo rate to deal with the uncertainty in the global financial systems. The chamber said it would bring relief to the Indian financial system which was facing liquidity pressure and would also boost the lost investor confidence in the Indian economy. “The central bank’s decision has come at the right time and the interest rate cut would help in averting the downward pressure on the GDP growth,” it said.

London, October 20
Starting the week on a positive note, Asian and European stocks went up as fresh rate cut by India and new rescue packages eased concerns of a prolonged credit crisis.

Japan's benchmark Nikkei 225 and South Korea's Kospi jumped as much as 4 per cent, whereas the London Stock Exchange's FTSE 100 rose over 2 per cent.

In another act of rescue in the Europe, Dutch government pumped in $13.4 billion into the country's financial services giant ING and the announcement has propped the stocks in the region.

Over the weekend, South Korean administration announced a bailout plan worth $130 billion, the biggest such step in the Asian region.

The benchmark Shanghai SE Composite IX climbed 2.25 per cent to 1,974.01 points.

For the third quarter, China's economic growth stood at 9 per cent. Reportedly, this is the first time in four years that the nation's growth is in single digit.

Japan's Nikkei, which had witnessed wild swings last week, ended the day at 9,005.59 points, up nearly 4 per cent while the Kospi grew 2.28 per cent to 1,207.63 points.

Among the Asian indices, Hong Kong's Hang Seng index saw substantial gains, jumping 5.28 per cent to 15,323.01 points.

Indonesia's Jakarta Composite Index, Singapore's benchmark Straits Times Index also ended in the green territory.

On the European front, along with FTSE 100, Germany's Dax and France's Cac 40 were also trading in the positive zone.

FTSE went up 2.39 per cent to 4,159.96 points, whereas Dax inched up 1.94 per cent to 4,873.91 points. In addition, Cac 40 rose 2.15 per cent to 3,401.55 points. — PTI

New Delhi, October 20
The promoters of Ranbaxy Laboratories today said they will off-load their 34.8 per cent stake in the company in favour of Daiichi Sankyo through off-market deal, putting an end to speculations.

The Singh family sold their 22 per cent holding to the Japanese firm, besides issuing 4.62 crore shares on preferential basis.

Daichii Sankyo has already acquired 20 per cent stake in the Gurgaon-based firm, and with today's acquisitions, Ranbaxy has become a subsidiary of the Japanese firm, which would now control 52.5 per cent in the domestic pharma major.

"We have today partly sold our stake (22 per cent) to Daiichi Sankyo. The entire promoter stake selling will take place off-market," Ranbaxy CEO and MD Malvinder Mohan Singh, also a promoter, told PTI.

The remaining 12.8 per cent would also be sold shortly, he said, adding all shares would be sold at Rs 737 per share. There had been speculations after SEBI had rejected the company's request for allowing the transaction to be carried out through market with exemptions to save on payment of taxes.

Singh said the transaction tax would be paid by the promoters to the government.

The company's board had today approved allotment of equity shares and warrants on a preferential basis and received Rs 3,585 crore from the Japanese firm for the same. The board also approved issuing 2.38 lakh warrants to the Japanese pharma firm.

Singh said the domestic firm would continue to operate as an independent and autonomous company and would closely co-operate with Daiichi Sankyo to explore and optimise the growth opportunities across the pharmaceutical value chain.

"We expect to assimilate the available synergies of both partners to exponentially enhance the overall scope, scale and effectiveness of the business," he said.

The substantial cash being infused by Daiichi Sankyo at this stage will be used to expand our business aggressively through the organic and inorganic routes while significantly strengthening our balance sheet, he added. — PTI

Mumbai, October 20
Home, consumer, corporate and personal loans are likely to become cheaper with Reserve Bank cutting the repo rate, or RBI's short-term lending rate to banks, by one per cent to eight per cent, first time since 2004, bankers said.

"This is clearly a measure to ease monetary policy and ensure smooth functioning of financial markets to support growth," ICICI Bank joint managing director Chanda Kochhar said.

Banks may take a relook at their interest rate structure in a little while, Corporation Bank CMD B Sambamurthy told PTI here.

Describing the RBI move as one "in line with the various the recent measures taken," Sambamurthy said the liquidity problem has now been addressed to.

"With inflation declining and inflationary expectations also under control, banks might reduce interest rates, but it is still too early to take a call."

Dena Bank's chief P L Gairola said banks would look at their cost of deposits before deciding on their rates.

"Interest rates could move downwards but much will depend on the cost of deposits. Unless it comes down, lending rates will not fall," he said.

Conforming to the view, OBC executive director Ratnakara Hegde said, with the cut in repo, both deposit and lending rates would soften in the near future. — PTI

Chandigarh, October 20
The high non-performing assets (NPA) level under various government-sponsored schemes for advancing loans to the priority sector, has prodded the Haryana State Level Bankers Committee to form a sub committee to look into the matter.

A decision to this effect was taken today at the bankers committee meeting headed by CMD of Punjab National Bank, Dr K.C. Chakrabarty. Astounded by ever-rising NPAs, Dr Chakrabarty said a committee headed by a representative of PNB and representatives of two other banks, besides an independent expert, should be constituted to look at why the NPA levels were so high and come out with a roadmap for the banks to bring this down.

This committee has been asked to submit its report in the next meeting of the SLBC, scheduled later this year. It may be noted that NPA level is as high as 30 per cent in the government- sponsored scheme of Prime Minister Rozgar Yojana (PMRY), while NPA is 31 per cent in Swaran Jayanti Shahri Rozgar Yojana (SJSRY). The NPA level in Swaranjayanti Gram Swarozgar Yojana (SGSY) is 22 per cent, while in Self-Help Groups (SHGs) it is 8 per cent.

The data supplied by the SLBC also shows that the maximum NPA accounts (17,153 accounts with Rs 50.56 crore) are in the PMRY scheme, followed by 14,907 accounts (with Rs 13.73 crore) in the SGSY. The NPA accounts in the other two schemes — SJSRY and SHGs — are relatively lower at 4,829 accounts with Rs 7.58 crore and 1,634 accounts with Rs 6.06 crore, respectively.

Dr Chakrabarty also expressed his displeasure with the Haryana Revenue Department’s inability to recover the dues of banks under the Haryana Agricultural Operations and Miscellaneous Provisions Act. The committee was informed that as many as 1,145 cases are pending for more than three years, involving an amount of Rs 6.71 crore. He asked the bankers to follow up the cases with the revenue authorities and get the pendency cleared and get it reconciled with the record available in the Revenue Department.

New Delhi, October 20
Despite a much perceptible slowdown in the Indian aviation business, the India story continues to hold promise for foreign airlines and major commercial aircraft manufacturers.

While Airbus and Boeing remain bullish on India, refusing to revise their outlook for aircraft sales forecast in India, international airlines Emirates on Monday announced a second round of expansion for the country, adding 31 weekly flights to its existing 132 weekly flights by February 2009.

The enhanced capacity will position Emirates as the single largest international carrier in Indian skies, operating 163 flights per week to 10 gateways, says Emirates’ vice-president (India and Nepal) Orhan Abbas.

As part of winter expansion plan, Emirates will step up frequencies to New Delhi, Mumbai, Bangalore, Hyderabad, Chennai and Kochi in a phased manner. With the addition of these flights, cargo capacity to New Delhi will increase to 389 tonne per week.

Abbas says, reasons for increase in capacity and optimism are because Emirates has been witnessing very healthy load factors of 70-75 per cent. “Increase in frequency comes in wake of rising traffic, both inbound and outbound, reiterating our belief in opportunities that the Indian market has to offer. We are extremely optimistic about the potential that exists here".

The airlines is equally bullish on the cargo front. It says that the present capacity of 2,112 tonne per week/8448 tonnes per month will increase up to 2,473 tonne per week/9,892 tonnes per month by November 2008 and 2,647 tonnes per week/10,588 tonnes per month by February 1, 2009.

“Increased flights from India will boost connectivity to our robust international network and at the same time add to India’s inbound arrivals, particularly as global business and leisure travelers focus their attention on one of the world’s fastest-growing economies”, he adds.

Mumbai, October 20
Public sector lender Canara Bank has announced a net profit of Rs 529.43 crore for the second quarter ended September 30, a 31.84 per cent growth over the corresponding period a year ago.

The PSU lender had a net profit of Rs 401.57 crore in the September quarter of FY'08, Canara Bank said in a filing to the Bombay Stock Exchange.

BRIEFLY

Oil rises amid talks of OPEC output cut
Singapore: World oil prices rose in Asian trade on Monday amid growing signs that OPEC will announce production cuts at a special meeting in Vienna this week, dealers said. New York's main contract, light sweet crude for November delivery was $1.12 higher at $72.97 a barrel from its close of $71.85 Friday in the United States. Brent North Sea crude for December delivery gained 95 cents to $70.55 a barrel. — AFP

Pak seeks aid from IMF
Islamabad: With its currency hitting its lowest ever and foreign exchange reserves falling, Pakistan has approached the International Monetary Fund to seek financial aid and also presented a programme for market reforms. Its foreign exchange reserves fell to a six-year low of less than $8 billion. — PTI

Corus to cut steel output
London: Tata-owned steel giant Corus has announced plans to cut production in Europe by up to one million tonne over the next three months due to slowing demand. "The decision is aimed at aligning steel production with demand, which is now affected by the consequences of the global financial crisis," the group said in a statement here.— PTI

Ebony Retail to expand
New Delhi: D.S. Constructions Group subsidiary Ebony Retail plans to add over 20 mid-sized stores by 2010 to step up its furniture division expansion drive. The exercise, which would see the company invest around Rs 70 crore, is part of its strategy to tap a significant share of the estimated Rs 25,000 crore Indian furniture market.— PTI

RBI staff on mass leave today
New Delhi: The RBI’s employees are going on mass casual leave on Tuesday to protest against withdrawal of pension updation and issues relating to superannuation. The main reason for the strike is an internal circular issued by the bank at the behest of the finance ministry to withdraw an updated pension scheme to pre-November, 1997 retirees. — PTI

RBI executive director
Mumbai: The RBI has appointed Deepak Mohanty as executive director for its Department of Economic Analysis and Policy and Department of Statistics and Information Management . The appointment is effective from October 13, RBI said. — UNI

IFFCO to expand Kalol plant
New Delhi: IFFCO has decided to set up a new plant at Kalol having a capacity of 4,000 MTPD of single stream urea plant along with ammonia plant with the capacity of 2,200 MTPD. The total cost of expansion is expected to be around Rs 5,000 crore. — TNS