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Rate Cut Impact Too little, too late M&M to
shut down plants up to 6 days |
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Aviation Notes Investor Guidance Kingfisher cuts fare
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Rate Cut Impact REPO RATE
is discount rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country’s monetary system. To temporarily expand the money supply, the central bank decreases repo rates (so that banks can swap their holdings of government securities for cash), to contract the money supply it increases the repo rates. Mumbai, December 6 K.C Chakrabarty, chairman and managing director of Punjab National Bank, whose PLR is lowest in the industry, said those banks that had not cut rates would do so. Besides, PNB also plans to review the asset-liability situation next month to take a view on cutting interest rates further in the light of the RBI’s announcement. Echoing the sentiments, ICICI Bank joint managing director Chanda Kochhar said the package was truly a strong signal and there was enough liquidity in the system and the rates should start moving southward. UCO Bank said the bank was planning to cut both deposit and lending rate by half a percentage point in January. “We are also planning to cut deposit and prime lending rate by 50 basis points from the next month,” said UCO Bank chief S.K Goel. “Overnight call rates would definitely come down. In a little while, both deposit and lending rates should also come down,” said IDBI Bank chief Yogesh Agarwal. Kapoor said inflation was no longer a concern as it was headed southwards and hence, there was a scope for further rate cuts going forward, he said. SBI chairman O.P Bhatt had said yesterday that his bank was waiting from a signal from the RBI to take a view on interest rates. “Currently, the consensus is that the interest rate must move down and efforts are being made in that direction,” Bhatt had said. Dena Bank chief P.L Gairola said the RBI rate cuts were expected and that the apex bank “has sent a strong signal for interest rates to soften”. On whether banks would reduce their PLRs, Agarwal said banks had cut PLRs in anticipation of the RBI cutting its key rates. “Today’s cuts will definitely address the concerns of banks, who had already cut their PLRs.” Currently, PLRs of most of the public sector lenders are around 13 per cent. It is expected that PLR would come down to 12.50 per cent by the end of the year.
— PTI |
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Too little, too late New Delhi, December 6 Economists say that this cut of diesel prices by Rs 2 and 1 per cent cut in interest rates is a stingy measure to meet a rapidly slowing economy, while the economy needs large measures to boost the negative spiral. These measures will hardly make a dent to curb the slowdown they say. Also, cutting down the rate of bank lending will have very little effect on the small enterprises and housing loan borrowers because interest rates on housing loans have been so high that the common man cannot afford to buy a new house. Economists say small entrepreneurs like hosiery exporters in Ludhiana or ancillary suppliers to large industries are feeling the heat slowdown and such a meagre rate cut will hardly be of much help to them. Economic affairs secretary, Ashok Chawla said today’s move of the RBI of cutting rates is a clear signal to the banks and those who have not taken the signals earlier to cut interest rates. However, according to industry associations like the PHD Chambers of Commerce and Industry, these measures are favourable steps towards strengthening investor confidence and stimulating demand. The reduction will help banks to improve the flow of credit to the productive sectors of the economy on viable terms. As the SMEs sector is hard hit by the current financial crisis, the liquidity support provided by RBI to SIDBI under the refinancing arrangement should help ease credit stress for SMEs. Federation of Indian Exporters Organisation said the government should supplement the endeavour of the RBI expeditiously and announce interest subvention scheme for exports along with other measures immediately. The package announced by RBI will give a boost to the housing sector and thereby propel growth for real estate and connected industries like cement, steel. The CII is of the view that economic activity is likely to pick up once confidence is restored. The RBI's policy actions will go a long way in reviving confidence. |
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M&M
to shut down plants up to 6 days Apollo Tyres closes unit KOCHI: Apollo Tyres on Saturday declared a lockout in its Kalamassery unit in Kerala accusing the trade unions of going on an “illegal” strike and resorting to negative and non-cooperative attitude. A company release said it was forced to take drastic measures to increase efficiency and reduce cost as it had been hit by recession.
— PTI Mumbai, December 6 "The manufacturing plants of the automotive sector (Nasik, Kandivli, Igatpuri, Zaheerabad and Hardwar) will work partially during the month," M&M said in a communique to the BSE. Most of these plants would be shut down for around three to six days depending on the market demand of the products manufactured in the respective plants, it added. "Taking into account the slowdown in demand for the company's products, it has been decided to align the company's production plan with the expected demand for the month of December, 2008," M&M said. The company's announcement comes days after its president (automotive sector) Pawan Goenka stating that production would always be as per sales and it would not over-produce unnecessarily to build up inventories at its facilities as well as with the dealers. Goenka had said along with domestic market, exports were facing slowdown in each country where M&M was present. M&M said the ongoing economic slowdown in the automotive industry was mainly on account of inadequate funding and high interest cost. The company's domestic sales in November were down by 41.55 per cent at 10,430 units compared to 17,844 units last year.
— PTI |
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Aviation Notes
Air India (National Aviation Company Limited) is truly a national carrier with firm nationalistic leanings. During crises, it always rises to the occasion as it has done this time. Air India is the first international carrier that has categorically announced sizable reduction in fares. It has withdrawn transaction fee. It has also reduced fuel surcharge, whatever may happen to its financial belly. It has resumed its flights from Kullu. Its stomach will get further trimmed; it will suffer more losses. But it has acted dispassionately Even under enlightened functioning, the powers that-be are not in appreciative mould. They continue to show greater patronage to the private operators, some of which are grossly guilty of polluting the flying pool. Air India’s record in this sphere has been outstanding. The airline is doing all this even when the merger has not really come about. Naseem Zaidi, is now new director-general in the civil aviation directorate. Back from the deputation in the International Civil Aviation Organisation, Zaidi will have to address to several thorny problems pertaining to appointments of foreign pilots while qualified Indian pilots are cooling their heels at home. The foreign pilots, it is learnt, fly only 15-20 hours a month and get hefty salary of more than $10,000 and perks. As the blame game is being pursued vigorously, all airports have turned into forts. The passengers travelling abroad have been advised that they should report at least three hours before the scheduled departure time. The earlier, the better. According to analysts, one agency like Central Industrial Security Force may check passengers time and again to eliminate doubt, if any, but there should not be two or three agencies, as it is happening at present. This causes more confusion than easing the problem. After recent attack on Mumbai, the authorities are installing more CCTVs. The analysts say monitoring should also be improved because mere installation of CCTVs will not fulfil the purpose. |
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Investor Guidance
Q: I am an NRI returning to India. I have stayed abroad for 2390 days (six-and-a-half years) prior to coming India in September 2008. During that period I used to come to India for short trips and that adds up to 268 days. I have returned to India for permanent in September 2008. I think I satisfy the condition of becoming an RNRO i.e, “He has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less”. Therefore, as per above, my understanding is I would be treated as RNOR. My question is whether my NRI income from April 1, 2008, till September 2008 would be taxable or not for this financial year (08-09)? When I say NRI income means earned and accrued abroad. — Dinesh A: For being an RNOR you have to either be an NRI for nine out of the last 10 years or you must have stayed in India for 729 days or less in the last seven years. An RNOR does not have to pay tax on his foreign income. As per information provided, you have not stayed in India for 729 days in the past seven years and therefore, you will get the status of RNOR for FY 08-09. Consequently, the income that you have earned abroad from April till September will be tax-free in India. PPF account
Q: I have a query regarding my PPF account with SBI that matured on March 31, 2008 after a period of 25 years (extended by 10 years). In case I withdraw my entire accumulated amount in December 2008 (around December 22, 2008), up to what period is the interest calculated? — R Gopalswamy A:
The interest will be paid up to November 30, 2008. If you so desire, you can extend the PPF account for an additional block of five years. Surplus cash
Q: I am salaried and have an option to park my surplus cash in VPF at 8.5 per cent. I will retire in 10 years. Which one will be better for me: BNB or VPF? — Tridiv Dutta A:
Whereas VPF will give you 8.5 per cent tax-free, BNB will earn you 8.41 per cent after tax. So both options are equally good, but since you already have a substantial amount in VPF, one would suggest going in for BNB. The authors may be contacted at
wonderlandconsultants@yahoo.com |
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