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RBI hikes CRR; leaves repo, reverse repo rates unchanged

Zeenews Bureau

Mumbai, April 29: With inflation risks on account of skyrocketing oil prices being the prime concern of the UPA government, the Reserve Bank of India (RBI) on Tuesday adopted a more hawkish stance as it announced its annual Credit Policy indicative of policy measures to further tighten liquidity. The RBI hiked the Cash Reserve Ratio by 25 basis points to 8.25%, while leaving the repo and reverse repo rates unchanged at 7.75 % and 6% respectively.

With regard to the CRR hike, the RBI said that it was necessitated by the emerging liquidity situation in the market. However, the apex banking authority doesn’t want the credit to slacken as it expects a growth of 20% in credit uptake for FY’09. The RBI also expects deposits to grow by 17% FY’09.

A hike in CRR is expected to lead to a rise in home loan interest rates. However, by increasing the limit for priority lending for the housing sector to Rs 30 lakhs up from Rs 20 lakhs, the banks are expected to get aggressive about home loans, especially in the metros.

As a policy measure the RBI is aiming to bring down the inflation to 5.5% this year, while on the long term it expects inflation to hover around 4-4.5 %.

The stock markets have reacted positively to the news as the Sensex was up by over 200 points to 17,241.82 minutes after the policy guidelines were announced.

With regard to GDP, the RBI appeared confident of achieving a growth of 8-8.5% for the current financial year.

Today’s rate hike comes at a time when the inflation rate is hovering around the 7% mark. Inflation stood at 7.33 percent for the week ended April 12, which is more than 200 basis points higher than the five percent tolerance limit set by RBI.

The RBI’s concern was apparent when it presented its Macroeconomic and Monetary Development Report on Monday. The report said, "Despite prospects for slower consumption growth in advanced economies, international crude prices are expected to remain at elevated levels in view of the relatively tight demand-supply balance.”

As per the RBI, all three key sectors — agriculture and allied activities, industry and services – have witnessed growth moderation. Yet, the growth performance of the country was in line with GDP growth in the last five years, the RBI said.

With rice and wheat prices increasing by 8.2 percent and 5.1 percent, respectively on a year-on-year basis on March 29, the rate cut is expected to control their prices and thus provide some relief to the middle class.

Incidentally, the RBI had in fact on April 17 announced a 50 basis points hike in the Cash Reserve Ratio (CRR) for banks in two phases - April 26 and May 10.

More Asian companies expected to tap IPO market

Singapore, April 29: More than 2,900 Asian companies have raised nearly USD 500 billion in equity through initial public offerings (IPO) since 1990, and the region's IPO market is expected to keep up its rapid growth, a Citigroup report said on Tuesday.

It cited a shift toward professional investment management of household savings, driving demand for share investments and the introduction of innovative listing vehicles such as property, business and infrastructure trusts.

The rapid economic growth of many Asian economies has prompted companies to raise money for expansion, and more families are seeking to cash in on the value of their businesses, Citigroup analysts said in the report.

IPOs have become an accepted solution for a broad array of corporate needs for Asian companies, such as financing for growth, monetization by founding entrepreneurs and privatization, they noted. While volume was choppy in the 1990s, the market has witnessed a sustained volume boom since 2001.

The analysis covered IPOs by Asian companies, including listings on exchanges outside Asia that raised more than 30 million US dollars.

GDP expected to be 7.8% in FY08: Report

New Delhi, April 29: On the back of strong government spending and investment activity, the global slowdown will only have a modest effect on Indian economy whereas the country's GDP is expected to ease to 7.8 per cent this year, says global credit rating agency Moody's in its latest report.

The report by Moody's economy.Com noted that slowing exports and tight monetary policy are the key downside risks to expansion this year.

Further, government's current priority to improve infrastructure and reduce poverty would witness strong demand for workers and household income grow at a stunning pace this year.

Public expenditure would receive a major boost in anticipation of the General Election to be held in May 2009, the report said.

"...However, thanks to strong government spending and investment activity, the global slowdown will have only modest effect. India's GDP growth is expected to slow to around 7.8 per cent in 2008, and rebound to 8 per cent the following year as the global economy rebuilds momentum," the report titled 'India outlook: A challenging time ahead' noted.

Meanwhile, the Reserve Bank of India today raised the Cash Reserve Ratio (CRR) by 0.25 per cent to 8.25 per cent in its annual monetary policy. The new CRR would be effective from May 24.

Pointing out that domestic demand is a key driver of expansion in the country, the report said that amid rapid wage growth, household demand would be solid.

However, strong inflation coupled with high borrowing costs would weigh on household budgets and dampen consumer spending.

Homes facing foreclosure more than doubled in 1Q from 2007
Tuesday April 29, 6:18 am

Number of US homes facing foreclosure jumps 112 percent in first quarter from 2007

LOS ANGELES -- The number of U.S. homes heading toward foreclosure more than doubled in the first quarter from a year earlier, as weakening property values and tighter lending left many homeowners powerless to prevent homes from being auctioned to the highest bidder, a research firm said Monday.
Among the hardest hit states were Nevada, Florida and, in particular, California, where Stockton led the nation with a foreclosure rate that was 6.6 times the national average, Irvine, Calif.-based RealtyTrac Inc. said.

Nationwide, 649,917 homes received at least one foreclosure-related filing in the first three months of the year, up 112 percent from 306,722 during the same period last year, RealtyTrac said.

The latest tally also represents an increase of 23 percent from the fourth quarter of last year.

RealtyTrac monitors default notices, auction sale notices and bank repossessions.

All told, one in every 194 households received a foreclosure filing during the quarter. Foreclosure filings increased in all but four states.

The most recent quarter marked the seventh consecutive quarter of rising foreclosure activity, RealtyTrac noted.

"What would normally alleviate the foreclosure situation in a normal market is people starting to buy properties again," said Rick Sharga, RealtyTrac's vice president of marketing.

However, the unavailability of loans for people without perfect credit and a significant down payment is slowing the process, he said.

"It's a cycle that's going to be difficult to break, and we're certainly not at the breaking point just yet," Sharga added.

The surge in foreclosure filings also suggests that much-touted campaigns by lawmakers and the mortgage lending industry aimed at helping at-risk homeowners aren't paying off.

Hope Now, a Bush administration-organized mortgage industry group, said nearly 503,000 homeowners had received mortgage aid in the first quarter. Most of the aid was temporary, however.

Pennsylvania was a notable standout in the latest foreclosure data. The number of homes in the state to receive a foreclosure-related filing plunged 24.4 percent from a year earlier.

Sharga credited the decline to the state's foreclosure relief measures, noting that cities such as Philadelphia put in place a moratorium on all foreclosure auctions for April and implemented other measures aimed at helping slow foreclosures.

Nearly 157,000 properties were repossessed by lenders nationwide during the quarter, according to RealtyTrac.

The flood of foreclosed properties on the market has contributed to falling or stagnating home values, yet lenders have yet to implement heavy discounts on repossessed homes, Sharga said.

Nevada posted the worst foreclosure rate in the nation, with one in every 54 households receiving a foreclosure-related notice, nearly four times the national rate.

The number of properties with a filing increased 137 percent over the same quarter last year but only rose 3 percent from the fourth quarter.

California had the most properties facing foreclosure at 169,831, an increase of 213 percent from a year earlier. It also posted the second-highest foreclosure rate in the country, with one in every 78 households receiving a foreclosure-related notice.

California metro areas accounted for six of the 10 U.S. metropolitan areas with the highest foreclosure rates in the first quarter, RealtyTrac said.

Many of the areas -- including Stockton, Riverside-San Bernardino, Fresno, Sacramento and Bakersfield -- are located in inland areas of the state where many first-time buyers overextend themselves financially to buy properties that have plunged in value since the market peak.

"California still hasn't hit bottom," Sharga said. "We have a lot of California homes that are in early stages of default that may not be salvageable because either there's no market or financing available, or both."

Arizona had the third-highest foreclosure rate, with one in every 95 households reporting a foreclosure filing in the quarter. A total of 27,404 homes reported at least one filing, up nearly 245 percent from a year ago and up 45 percent from the last quarter of 2007.

Florida had 87,893 homes reporting at least one foreclosure filing, a 178 percent jump from the first quarter of last year and a 17 percent hike from the fourth quarter last year. That translates into a foreclosure rate of one in every 97 households.

The other states among the top 10 with the highest foreclosure rates were Colorado, Georgia, Michigan, Ohio, Massachusetts and Connecticut.

Parsvnath to build 8-10 hypermarkets

Singapore, April 29: Real estate firm Parsvnath Developers said on Tuesday it will announce a joint venture with a foreign partner in June to develop hypermarkets in India, as rising incomes boost spending power in the country.

"Our focus in the first year for the joint venture will be to have 8 to 10 hypermarkets in operation, starting from North India," Parsvnath Chairman Pradeep Jain told in an interview in Singapore.

The developer, which has built 31 projects in India including malls and apartments, is also targeting second and third-tier cities like Mysore and Jaipur for new townships as populations spill out of overcrowded cities such as Bangalore and Chennai, Jain said.

TRIL signs pact to set up Rs 3,000-cr IT SEZ in Chennai

Chennai, April 28: Tata Realty and Infrastructure, a wholly-owned subsidiary of Tata Sons Ltd, on Monday said it has signed a memorandum of understanding with the Tamil Nadu Industrial Development Corporation and Indian Hotels Company for setting up of a Rs 3,000-crore SEZ for IT industries here.

IT special economic zone (SEZ) is expected to generate direct employment to about 40,000 persons and indirect jobs to about 15,000 persons, a release said.

The project would be completed in two phases, with the first phase of 2.3 million sqft being ready by 2009, it said, adding that the entire project of around 4 million sqft would be completed by 2011.

An integrated international conference centre, a five star hotel and residential flats would be part of the zone, it said.

The MoU was signed in the presence of state Chief Minister M Karunanidhi, the release added.

3i Infotech to acquire US-based Regulus Group

Mumbai, April 29: Global information technology company 3i Infotech on Tuesday said it will acquire US-based Regulus Group LLC (Regulus), an independent remittance and document processing services provider, for up to USD 100 million dollars.

The cost of the acquisition is approximately USD 80 million with additional consideration of up to USD 20 million based on an earn-out linked to certain performance parameters, 3i Infotech said in a filing to the Bombay Stock Exchange.

"The acquisition of Regutits Group is a strategic one and will enable 3i Infotech to strengthen its positioning in the payment processing industry," 3i Infotech managing director and CEO V Srinivasan said.

The company has signed an agreement with Regulus Group under which it would acquire 100 per cent stake the company, including its products, trademarks and brands.

California-based Regulus handles over 2.1 billion paper and electronic transactions annually. It operates through 10 processing centers in California, Georgia, Illinois, New Jersey, North Carolina, Iowa and Texas.

Regulus has around 1,300 employees and serves around 150 clients through its direct sales force and about 85 additional clients generated through reseller partnerships.

Pursuant to the acquisition, current Regulus CEO Richard Long would step down and Kathleen Hamburger, current president and Chief Operating Officer of the firm, would assume the role of CEO.

Shares of 3i Infotech were trading at Rs 123, up 2.71 per cent on BSE in morning trade.

Coimbatore gets first Adlabs cinema

Mumbai, April 29: Adlabs Cinemas, part of the Reliance-Anil Dhirubhai Ambani Group, took over Tamil Nadu's prestigious K.G. Cinemas in Coimbatore and opened its first multi-screen property in the city.

The four-screen cinema has been re-named K.G. Adlabs.

'We have just begun to penetrate the southern region and expect to capture a big market share there by the year-end. We see immense potential for our Coimbatore property as the city is considered the Manchester of south India with a booming textile sector, engineering hub and emerging IT potential,' Tushar Dhingra, chief operating officer of Adlabs Cinemas, told.

Situated at Bungalow Road, K.G. Adlabs has a 2,253 seating capacity. The company expects 10,000 admissions daily.

RIL wants HC to vacate stay to sale of gas from KG basin

Mumbai, April 29: Mukesh Ambani-led Reliance Industries Ltd on Tuesday asked the Bombay High Court to revoke stay to sale of gas from Krishna Godavari basin, which it has purportedly committed to Reliance Natural Resources Ltd, controlled by Anil Ambani.

RIL contends that the High Court's stay makes it impossible to excavate gas, as technically it is not possible to "curtail gas flow".

The High Court adjourned the arguments on this issue till tomorrow.

The two Ambani brothers are litigating for the past one year over agreement whereby RIL will be supplying gas to RNRL, as a part of Reliance demerger deal, for the latter's power project at Dadri in Uttar Pradesh.

Last may, Justice A M Khavilkar of the Bombay High Court restrained RIL from creating `third party interests' with regard to 40 MMSCMD of natural gas from KG basins -- which RNRL is claiming under the agreement in question.

The main issue is terms of gas supply master agreement between the two: RNRL says that present GSMA is vague and doesn't fix tenure, price or quantity of gas to be supplied.

Last October, another judge of the High Court asked both parties to try and renegotiate the GSMA, but it did not work out and now the case is before division bench of Chief Justice Swatanter Kumar and V M Kanade.

Arguing for RIL, senior counsel Harish Salve said that the unit MMSCMD (Million Standard Cubic Metre Per Day) denoted a rate of gas excavation, and it was not possible to curtail the flow of gas to leave out the share claimed by RNRL.