Mumbai, July 2
The Reserve Bank today raised key short-term policy rates by 25 basis points, in an unscheduled announcement, to tame double-digit inflation, but bankers said this wouldn't lead to any hike in interest rates for now.

The increase in rates comes ahead of the July 27 policy review by the apex bank, which feels that money supply in the system has started easing in contrast to the crunch felt just a fortnight ago when corporate demand for funds shot up.

RBI's decision to increase the short-term rates at which it lends (repo) and borrows (reverse repo) money from commercial banks, however, may not have any immediate impact on the interest rates which home and car loan seekers and corporate borrowers pay, say bankers.

Hike in repo and reverse repo by 25 basis points to 5.50 per cent and 4 per cent, respectively, "should contain inflation and anchor inflationary expectations going forward, while not hurting the recovery process", said the RBI.

Wholesale prices-based inflation crossed double digits (10.16 per cent provisionally) in May, but as per final figures the rate of price rise has been 11 per cent or more since February. Food inflation eased to 12.92 per cent in the third week of June from above 16 per cent.

Justifying its mid-course action, the RBI said, "The developments on the inflation front, however, raise several concerns...Food price inflation and consumer price inflation remain at elevated levels. There has been some moderation in food price inflation, but the price index of food articles continues to increase".

RBI had earlier increased the repo and reverse-repo rates by 25 basis points in April.

On the impact of hike in key rates on interest rates, SBI chairman OP Bhatt said, "RBI's move may not impact interest rate till July 27...RBI's move will not impact base rate of SBI." The bank would think of some decision only after the monetary policy review on July 27, said the chief of SBI, which this week pegged the base rate, the minimum lending rate, at 7.5 per cent.

RBI's action, said ICICI Bank CEO and MD Chanda Kochhar, "is consistent with its gradual normalisation of policy rates towards a level consistent with the economic growth, in a non-disruptive manner." Although the monetary tightening steps are being announced at a time when the banks are complaining of liquidity crunch arising from payment of more than Rs 1 lakh crore towards 3G licence fee and advance taxes, the RBI said the liquidity situation has started improving.

Besides, the RBI has extended the additional liquidity facility, through which it infuses liquidity in the banking system, till July 16. The facility was to end today. — PTI 

New Delhi, July 2
The Hongkong and Shanghai Banking Corporation (HSBC) today announced it will acquire the Indian business of Royal Bank of Scotland worth $1.8 billion, a move that will help the British giant gain greater exposure in the country.

RBS’s retail and commercial banking businesses in India currently have 1.1 million customer relationships served by over 1,800 staff through 31 branches.

HSBC expects to complete the acquisition through its Indian subsidiary by the first half of 2011.

"The total consideration will comprise a premium of up to $95 million over the tangible net asset value of the businesses being acquired at the closing of the transaction, less an adjustment equal to 90 per cent of any credit losses incurred on the unsecured lending portfolio in the two years subsequent to deal completion," HSBC said in a statement here.

This is the third major transaction for HSBC in India.

In June 2008, HSBC entered into a joint venture insurance company with Canara Bank and Oriental Bank of Commerce, gaining access to a distribution network of 5,000 branches and 50 million customers. In September of the same year, HSBC acquired IL&FS Investsmart, now HSBC InvestDirect, a major retail brokerage with more than 130,000 customers and outlets across 52 cities.

HSBC Group chief executive and chairman of The Hongkong and Shanghai Banking Corporation Limited, said: "The main focus of our strategy is on emerging markets and this acquisition is our third transaction in one of the world's largest and fastest growing developing markets in the last two years." India was the second fastest growing economy in the world by GDP last year and is set for another strong year with forecast GDP growth of 8.5 per cent in 2010. According to the International Monetary Fund, it is expected to be the world's third largest economy, based on purchasing power parity, by 2012. — PTI 

Mumbai, July 2
Anil Ambani-led Reliance Power's board will on July 4 consider merging another group firm Reliance Natural Resources (RNRL) with itself. A meeting of Reliance Power's board of directors has been called on Sunday to consider the merger, the company said in a statement.

The statement was released after the close of stock market, but speculation about the deal pulled down the shares of both the companies sharply in the last minutes of trading.

While RNRL settled 2 per cent down at Rs 63.65 a share, R-Power managed to close 3 per cent up at Rs 174.50 a piece.

In intra-day trade, R-Power had gained as much as 5 per cent, but RNRL fell by over 7 per cent.

While the companies did not disclose any details of the proposed merger, some brokers said that rumours are about a share-swap deal with four shares of RNRL for every one R-Power share. Currently, the two stocks have market values in the ratio of about 1:3. The two companies together command a market capitalisation of Rs 50,000 crore.

RNRL said in a separate statement that its Board will meet on July 4 to consider the merger. Late last month, RNRL signed a revised gas sales master agreement with Mukesh Ambani-led RIL for sourcing gas for Reliance Power. But, the agreement did not contain the price, quantity or duration of supply of gas. — PTI 

Jaipur, July 2
A high-level delegation comprising ministers and bureaucrats headed by Chief Minister Ashok Gehlot on Wednesday left for the USA to woo the investors at a convention being organised by the Rajasthan Association of North America (RANA).

Addressing mediapersons prior to leaving for the US, Chief Minister Gehlot, however, chose to play it safe and said they don’t intend to ask non-resident Rajasthanis to invest in the state and their only aim is to ensure that the Rajasthanis living abroad stay connected with their roots. At the same time, he said they will hold discussion with them on health, education, art, culture and tourism, apart from briefing them on the state’s newly released industrial and investment promotion policy.

“We will leave it to them whether they want to invest in our state or not,” he said. Taking a dig at the previous BJP regime led by Vasundhara Raje, he said, “We don’t believe in giving slogans like Resurgent Rajasthan and signing MoUs which don’t materialise later on.” Raje, during her stint, had showcased Resurgent Rajasthan and floated MoUs worth hundreds of crores, but investment didn’t exceed Rs 30 crore.

The delegation is expected to participate in a series of seminars on various subjects, including business, investment, technology, health and education, which would be attended by about 2,000 people from all over the world.

Meanwhile, the state government yesterday released its new industrial policy which aims at enhancing enterprise and sector competitiveness while stimulating a substantial increase in the flow of investment from within India as well as abroad. Under the policy, the government intends to make Single Window Clearance System more effective to reduce average time required for setting up units in the state. An Infrastructure Development Act would be enacted to delineate a legal framework and roadmap for private participation. It is also proposed to enhance the competitiveness of enterprises by facilitating quality network of roads, uninterrupted power availability, adequate water, high speed data transfer connectivity and efficient logistic facilities.

The government will also expedite the availability of land for industrial and infrastructural projects.

Hyderabad, July 2
Ranked fourth in the country in IT exports, Andhra Pradesh yesterday unveiled an ambitious information technology and communications (ICT) policy, focusing mainly on sops to small and medium enterprises (SMEs).

“Our export target is Rs 70,000 crore by 2015 as against the present level of Rs 32,500 crore. We want to create 1.25 lakh direct jobs and 5 lakh indirect jobs in the IT sector over the next five years,” state IT Minister K Venkat Reddy said.

Earlier in the day, the state cabinet ratified the ICT policy 2010-15, projecting 17 percent annual growth rate in IT exports.

AP currently accounts for 15 per cent of the country’s total IT exports and ranks fourth after Karnataka, Maharashtra and Tamil Nadu.

As part of the policy, the government would set up towers in notified IT special economic zones (SEZs) and make it mandatory for major companies to outsource 10 to 20 per cent of the government projects to SMEs.

The SMEs would get special incentives, including 100 per cent reimbursement of stamp duty, transfer duty and registration on sale/lease deeds and 25 per cent subsidy on lease rentals up to Rs 5 lakh per annum up to a period of three years in STPI/SEZ.

The IT start-ups would be entitled for assistance of Rs 2.5 lakh for recruitments made up to 50 IT professionals within a period of one year.

It has also been decided to develop a gaming and animation facility with incubation space, shared studios, processing labs, media centre and conference facilities. An animation and gaming academy will also be set up in collaboration with the industry.

Meanwhile, the state government has sent a proposal to the Centre to set up the country’s first Information Technology Investment Region (ITIR) in Hyderabad.

The government has already identified 6,000 acres of land for the purpose on the city outskirts.

The ITIR, which will house IT, ITeS and electronic hardware manufacturing units besides self-sustained townships, is expected to attract investments of about Rs 2.19 lakh crore, apart from generating 15 lakh direct jobs.

BRIEFLY

Gold plummets by Rs 410
New Delhi: Gold prices tanked in the national capital on Friday, registering a steep loss of Rs 410 to fall below the Rs 19,000 level on heavy selling by stockists amid signs that Europe's economy may be in better shape than expected, curbing demand for the metal as an investment haven. The precious metal is being quoted at Rs 18,730 per 10 grams after suffering its biggest loss since February 5.— PTI

Ranbaxy transfers drug discovery unit to Daiichi
New Delhi: Ranbaxy Laboratories on Friday said it has transferred its new drug discovery research unit to Daiichi Sankyo India Pharma as part of strengthening global research and development structure of the group. As part of the transfer, Ranbaxy's new drug discovery research will be renamed as Daiichi Sankyo Life Science Research Center, which will be under Daiichi Sankyo India Pharma.— PTI

Torrent Power-Siemens tieup
New Delhi: Torrent Power on Friday signed engineering, procurement and construction (EPC) contracts with Siemens AG, Germany and Siemens India for its two projects. The turnkey EPC contracts would be for expansion of Torrent Power's existing mega power project UNOSUGEN, the company said. — PTI

Glodyne acquires US firm
Mumbai: Technology management services provider Glodyne Technoserve on Friday said it has completed the acquisition of the US-based technology company DecisionOne Corporation from its shareholders for $104 million. DecisionOne is one of the largest, profitable pure-play Technology IMS companies in North America, with a revenue of $200 million and EBITDA margin of 8.1 per cent in calendar year 2009. — PTI

Allahabad Bank base rate at 8%
Chandigarh: Allahabad Bank has fixed the base rate for lending at 8 per cent. It will be reviewed by the bank at least once in a quarter. The bank said an option will be given to existing borrowers who want to switch over to the new system from BPLR system on mutually agreed terms. — TNS