Bangalore/New Delhi, Aug 11
Kingfisher Airlines, which used to be India's second biggest carrier but is now struggling with crushing debt, posted another quarterly loss on Saturday and shed no light on any potential funding lifeline.

Kingfisher, controlled by flamboyant liquor baron Vijay Mallya, is the biggest victim of turbulence in the Indian aviation industry, which has struggled under high state taxes on jet fuel, high airport charges, below-cost fares and an uncertain regulatory environment.

Kingfisher, which has never made a profit since its founding in 2005, reported a loss of Rs 650.78 crore for the quarter ending June 30 this year as against a loss of Rs 1,162 crore loss recorded in the previous quarter. The operating loss of Rs 204 crore for the quarter was also less than half the loss of Rs 429 crore recorded in the previous quarter. However, both net loss and operating loss in Q1FY13 were substantially higher than the figures reported for the quarter in the previous year. Net loss in April–June 2011 was Rs 263.53 crore while the operating loss was Rs 79 crore.

The fortunes of Kingfisher, saddled with $1.4 billion in debt, hang on its ability to raise funds soon. It needs at least $500 million immediately to keep operating, according to the Centre for Asia Pacific Aviation consultancy.

It has long hoped a government proposal to let foreign carriers take a maximum 49% stake in domestic airlines will be made law, providing it a potential lifeline. That proposal is stalled by complicated coalition government politics and there is no clarity on whether or when it will be implemented. No foreign airline has publicly shown any interest in picking up a stake in Kingfisher.

TOUGH SKIES: State taxes of up to 30% make jet fuel about 5 0% costlier in India than the global average. Fuel constitutes about half of an airline's total costs. In India, airport charges are also high, and New Delhi airport has been termed the world's costliest by IATA, which represents more than 80% of global air traffic.

Chandigarh, August 11
The three regional rural banks in Punjab — Punjab Gramin Bank, Malwa Gramin Bank and Satlej Gramin Bank — are likely to be merged soon. The amalgamated entity will be called the Punjab Gramin Bank.

Sources familiar with the development said the amalgamation of the three regional rural banks (RRBs) is part of a nationwide exercise initiated by the finance ministry to merge geographically contiguous RRBs within a state and optimize the use of resources. As part of this exercise, 63 RRBs will come under the purview of amalgamation and 27 larger and stronger banking entities will be created to improve services to essentially poorer residents of rural areas.

The ministry has reasoned such amalgamation of RRBs will also help in optimizing the use of modern technology.

It is learnt the proposal is now gaining steam, with Punjab Gramin Bank asking the other two RRBs for their audited balance sheets, revenue, profit & loss account statements and other financial data. Punjab National Bank, Punjab Gramin Bank’s sponsor bank, has reportedly given its “no objection” certificate for the merger process to be initiated.

Punjab Gramin Bank, the largest regional rural bank in the state with 180 branches in 13 districts, has reserves of Rs 334.48 crore, a net worth of Rs 357 crore and total business of Rs 4,058.89 crore.

It may be mentioned officers and employees of both Malwa and Satlej Gramin Banks are opposing the merger with Punjab Gramin Bank. They feel the exercise may disrupt these banks’ existing expansion and financial inclusion plans as merged entities will take time to settle down. They also feel consolidation may slow down financial inclusion. 

New Delhi, August 11
The return of a pro-market reformer to India's finance ministry has cheered investors and contributed to a market rally, but Palaniappan Chidambaram will need both political deftness and some luck to tackle the problems dragging the economy down.

Faced with impatient financial markets and the threat that India's credit rating could be cut to junk, Chidambaram has wasted no time since moving into his old ministry last week.

He has ordered a review of retrospective tax rules that had panicked foreign investors and sidelined officials behind those rules. And, in his first public comments, the Harvard-educated former lawyer vowed to fill a gaping hole in the budget and ease the burden of high interest rates on consumers.

In what is perhaps testament to his nimble media management, newspapers have somehow got wind of new early-morning starts and long hours for officials at the previously laid-back ministry.

During his last stint at finance, Chidambaram oversaw India's fastest growth surge in the past two decades that helped steer the economy through the worst of the global financial crisis. But this time, Chidambaram's task is more daunting.

Industrial output has fallen from year-earlier levels in three out of the last four months, and a summer drought has triggered a slew of cuts in growth forecasts, with economists predicting this year's economic expansion as low as 5.4%, the worst in a decade. He also inherits the political constraints that stymied his predecessor Pranab Mukherjee's efforts to push major reforms.

Bills that would bring crucial financial-sector reforms were removed from the agenda of the current parliament session because Prime Minister Manmohan Singh failed to win support for them from coalition allies and even some in his own party.

Efforts to allow foreign supermarkets to set up in India have also run into opposition because, although such a step would ease supply-side bottlenecks in an inflation-plagued economy, political parties fear it would cost jobs — and votes.

"Things are easier said than done in India," says Robert Prior-Wandesforde, an economist with Credit Suisse in Singapore, referring to New Delhi's repeated reneging on promises. "Rather than promising and running the risk of not delivering. I’d like to see him delivering, then talking."

FISCAL TEST: The new minister's biggest test will be controlling the fiscal deficit, which overshot a target of 4.6% of GDP by 1.2 percentage points in 2011/12 due to slowing growth and increased spending on fuel and fertilizer subsidies.

India's sovereign credit rating is at risk because of the high fiscal deficit, whose funding from domestic savings is crowding out private investment and lowering growth prospects. However, a drought due to disappointing monsoon rains will push the government to spend more on relief for farmers. — Reuters

New York/London, August 11
Standard Chartered is in talks with multiple law-enforcement officials, including New York's banking regulator, to resolve a probe into improper Iranian money transactions by the British bank, according to people familiar with the situation.

The settlement negotiations are expected to last through the weekend and could result in a resolution by next week, these people said. The negotiations are at a delicate stage and could collapse, they added.

The negotiations come after a rancorous week that began when Benjamin Lawsky, superintendent of the New York Department of Financial Services, alleged in an order on Monday that the bank processed thousands of illegal transactions tied to Iran and that Standard Chartered had covered up its actions using incomplete or false records.

Lawsky demanded that Standard Chartered officials appear at his office next Wednesday to explain why the bank should be allowed to keep doing business in New York, a global hub for the processing of dollars. The hearing remained on the calendar as of Friday afternoon. Lawsky's order not only shocked the bank but also federal and local regulators. The bank had been cooperating in a months-long probe and subsequent settlement talks with federal and local regulators. — Reuters

New Delhi, August 11
Prime Minister Manmohan Singh said Saturday the downgrade of India's growth forecast by Moody's was a cause of concern but stressed that the fundamentals of the economy were “strong”.

"It’s a cause of concern but one should not draw unwarranted conclusions," Singh told reporters when asked to comment on ratings agency Moody's commentary on the Indian economy.

Moody's research arm had scaled down its forecast for the country's economic growth this fiscal to 5.5% earlier this week. Several brokerages like CLSA, Citigroup, Goldman Sachs, Bank of America Merrill Lynch and Indian rating agency, Crisil have also lowered their forecasts to around 5.3-5.5%.

Singh expressed hope that India would better last year's economic growth of 6.5%. "The fundamentals of Indian economy are strong. Investments and savings are among the highest in the world. I am hopeful, we will do still better than 6.5% growth performance of last year," he said.

"There has been little policy response from either the Reserve Bank of India or the government and with global uncertainty dragging on, we see nothing on the horizon to lift the economy from its funk," Moody's Analytics had said in the analysis.

Moody’s said confidence among Indian firms has been crushed by weak demand, elevated interest rates, high inflation, and most significantly, the instability created by a weak central government that has badly lost its way.

“India’s central government is the single biggest factor weighing on business confidence and the economic outlook”, Moody’s said. The global turbulence and a weak monsoon were among the other factors depressing the economy, it added.

Singh’s remarks on the economy drew a response on Saturday from the BJP which accused him of being in "denial mode" over the state of Indian economy. It asked the government to treat the present problems as a "wake-up" call and take effective measures.

"The patient doesn’t want to be treated. He is convinced that he is not unwell. Singh’s statement that fundamentals of the Indian economy are strong comes as a surprise. It clearly shows the PM is living in denial about the real state of the India economy," leader of the opposition in Rajya Sabha, Arun Jaitley told reporters .

He said experts both outside and within the country are commenting adversely on the state of Indian economy and Singh and his government are behaving "like a patient who refuses to accept that he is ill".

"The sentiment is low. India is no longer an investment destination. Inflation has reached unacceptable levels. Infrastructure ministries are moving slowly. Corruption has created an adverse environment. This government is being accused of policy paralysis," Jaitley said.

He maintained that the government should treat this as a "wake-up call" and the PM must respond to it rather than living in denial. "The economy isn’t run by bravado," Jaitley added.