New Delhi, July 3
Finance Minister P Chidambaram has asked public sector banks to review their lending rates to see if they can be reduced.

“We have advised banks to look at the base rate,” Chidambaram said after a meeting with heads of public sector banks and financial institutions.

“Reduction in base rate will be powerful stimulus to boost credit growth,” he said adding that unless the base rate is cut, interest rates cannot be brought down.

While the RBI has reduced the policy rates by 125 basis points since January 2012 to prop up growth, banks have lowered the lending rates by only 0.30 per cent during the period. The sluggish growth in deposits has been among the reasons for the slow transmission of interest rates.

While stressing that each bank will take its own decision, the Finance Minister said bank chiefs had assured him that they will carry out a review during the month of July. Banks said the increase in provisioning norms and increase in cost of funds had been hampering cutting of interest rates.

On the issue of rising bad loans, Chidambaram asked banks to focus on top defaulters and take action against them. “You focus on the top defaulters, as well as keep an eye on the top performing accounts. They are keeping a close watch on the top 30 non-performing accounts in each bank and action will be taken on the defaulters,” he added. Non-performing assets of banks have been on the rise for past several months due to slowdown in the economy.

Chidambaram further said the banks would open over 8,000 new branches this year. While the deposit growth has been modest for the fiscal ending March 2013, the credit growth has been slow.

At the end of March 31, 2013, public sector banks’ deposits grew by 14.91 per cent, slightly higher than the growth rate of 14.4 per cent recorded in previous year. Credit growth at the end of March 31, 2013, was 15.62 which is a decline from the previous year’s 17.76 per cent.

“There is good credit demand from a few sectors — agriculture, small and medium enterprises and retail loans,” he said.

In housing, there are signs of growth especially in real estate for residential purposes. On the infrastructure side, there are some signs of higher credit demand in roads and non-conventional energy sector, he added.

Replying to a query on new bank licences for which 26 entities have applied before the RBI, the Finance Minister said, “Every guideline has to be satisfied. However, it is the RBI which will give the licences and the government will have no say in it”.

New Delhi, July 3
The Coal Ministry today allocated 14 coal blocks with reserves exceeding 8,311 million tonne (MT) without finalising their reserve price.

The coal blocks, which are unexplored, have been given to the state power generating companies and the public sector power companies have been allocated under the new Competitive Bidding of Coal Mines Rules notified in 2012.

The allocation would lead to an investment of Rs 1,60,000 crore in the power sector, the coal ministry said in a statement. The largest of the 14 blocks, Deoca Pachami in West Bengal, has been allocated jointly to six states.

The ministry further said the coal blocks have been allocated on the recommendation of the Inter-Ministerial Committee after due deliberations at every stage with applicant State Government, host states where the coal blocks are located and the Ministry of Power and Central Electricity Authority.

The reserves have been allocated to 15 state utilities and six central Public Sector Undertakings (PSUs), the statement said, without clarifying as to why no reserve price was decided for the blocks before being allocated or what was the criterion for the allocation of the coal blocks.

The 14 blocks have a production potential of 159 MT per annum and would allow the power generating companies to produce up to 31,800 MW of power. This includes the largest power generator NTPC Ltd which has been allocated four blocks with 1,995 MT reserves.

The statement further said, “A total of 318 applications were received in the ministry out of which 276 were found to be complete in all respects. Out of these, 235 applications pertained to 14 blocks for power. After scrutiny and verification of facts and other important parameters, 128 applications were considered eligible for these 14 blocks for power”.

While no reserve price has been decided for these coal blocks, the Coal Ministry officials said an undertaking was being taken from these companies for payment of reserve price later.

New Delhi, July 3
India's services sector activity slowed down in June owing to a decline in new business orders and subdued economic conditions, an HSBC survey said.

The HSBC/Markit purchasing managers index for the services industry, which was released today, fell from May's three-month high 53.6 to 51.7 in June.

Moreover, subdued economic conditions was also a major factor behind the deceleration in output growth, HSBC said.

A reading above 50 shows that the sector is expanding, while that below 50 shows that the output in the sector is contracting.

"Service sector activity grew at a slower clip as new business flows moderated, which made businesses less optimistic about the year ahead," HSBC chief economist for India and ASEAN Leif Eskesen said.

The slower pace of growth in the services sector is reflected in service providers' subdued optimism towards output growth in the next 12 months, the survey said.

Earlier this week, the HSBC/Markit manufacturing PMI showed that the manufacturing sector output remained broadly flat in June as new orders declined for the first time in over four years.

Accordingly, the HSBC India Composite Output Index, which maps both services and manufacturing activity fell from 52 in May to 50.9 in June.

On price rise, the report said faster rates of inflation were signalled in the Indian private sector during June as input prices rose solidly, amid higher raw material, labour and fuel costs.

"Notwithstanding the slowdown, inflation readings firmed (up) on the back of higher labour and raw material prices, with the depreciation of the rupee also cited as a factor," Eskesen said.

The rupee last week sank to an all-time low of 60.76 against dollar on heavy capital outflows and month-end dollar demand from importers. — PTI

Mumbai, July 3
Real estate firm Omaxe today said it will invest Rs 200 crore to set up a five-star hotel in New Chandigarh, where it is developing an integrated township.

The company has joined hands with the Intercontinental Hotel Group (IHG) to manage and set up the 150-room hotel, named as Holiday Inn, a statement issued here said.

"Omaxe will invest close to Rs 200 crore in building this luxurious hotel that will cater to corporates and the local elite, including tourists," the statement said.

The office and retail spaces in the vicinity have been attracting reputed companies from sectors like IT, BFSI and retail in the national and international arena, it said.

"This hotel is a step forward towards creation of a commercial hub in Omaxe New Chandigarh that will house two offices and retail spaces — International Trade Tower and India Trade Tower — along side the hotel," according to the release. — PTI

New Delhi, July 3
The rupee that has depreciated by over 10 per cent in the last one month and is witnessing high volatility is adding to corporate treasury dilemma and especially for companies dealing with commodities and IT/ITEs sectors, says a KPMG report.

According to KPMG India survey titled 'Managing currency and commodity risks' that was released today, a stronger organisational risk culture and greater support from the management are perceived to be the major areas of improvement for better risk management.

The dilemma of how much to hedge and for what tenor confronts most treasurers, the survey that covered treasury heads and chief financial officers said.

“Companies do not want to lose out to competition in future because their portfolios are aggressively hedged nor do they want to miss out on the current opportunity of locking in profits on their exposures,” the report said, adding this is particularly true of companies dealing with commodities and those in the IT/ITEs sectors.

"Active management of the risk of fluctuations in the currency market is no longer an option, it is a necessity and vital to maintaining business profitability," Kuntal Sur, Director, Financial Risk Management, KPMG in India said.

Sur further added the time has come to go beyond 'crystal ball' gazing, as the companies that relied on market expert views; left with red on their financial statements.

“With currencies moving over 10 per cent in a month you do not need a crystal ball; you need an independent risk management process,” Sur said.

Around 87 per cent of the respondents said a stronger organisational risk culture would help in improving risk management in the company. In addition, a need for better communication between the treasury and the business units was also felt by a majority of the respondents.

The survey further noted that while the urge to foresee the future and beat the market is high, more and more companies are realising that it is better to be prudent and hedge exposures in a structured manner, than to rely on market gurus and their ever changing forecasts. — PTI 

BRIEFLY

Rupee breaches 60-mark again
Mumbai: Continuing its downslide for the third straight day, rupee on Wednesday plunged by 55 paise to close at 60.21 due to fresh capital outflows and sustained dollar demand from importers. — PTI

Toyota recalls 1.85 lakh cars
Tokyo: Toyota Motor Corp. is recalling 185,000 vehicles globally, mostly in Japan and Europe, for a glitch in the power steering. No accidents have been reported related to the problem. — PTI

Govt clears 8 FDI proposals
New Delhi: Eight FDI proposals worth Rs 1,311.54 crore, including that of Norwegian telecom firm Telenor, have been cleared by the government on the basis of FIPB approvals. — PTI

SBoP regional office inaugurated
Chandigarh: State Bank of Patiala opened its regional office at Solan on Wednesday which will coordinate and look after the work of 29 branches in the district. It was inaugurated by managing director Achal Kumar Gupta. A customer meet was also organised and a rain shelter, built by the bank, as part of its corporate social responsibility, was also handed over to the Solan municipal council. —TNS

Honda launches Dream Neo
Chandigarh: Honda on Wednesday launched Dream Neo — a 110cc bike — here. The bike is available in three variants and priced between Rs 44,592 and 47,682. — TNS

Havells to double ouput at Baddi
Ahmedabad: Havells India said on Tuesday it is in the process of doubling the production capacity of its unit at Baddi. "The unit will begin manufacturing 1 million stock keeping units (SKUs) per day by this month-end, which is just the double of the present capacity of 5 lakh SKUs per day,” company’s senior VP Deepak Agarwal said.— PTI

Task force for rehabilitation of Uttarakhand
New Delhi: Industry body Ficci has set up a task force to undertake rehabilitation work in the flood-ravaged Uttarakhand. The task force will carry out initiatives aimed at affordable housing, providing clean drinking water, improved sanitation and other forms of civic amenities through partnership with Science & Technology institutes and R&D centres. — PTI