9 December 2000

ICICI Bank and Bank of Madura to merge
Mumbai: ICICI Bank and Bank of Madura are planning a merger of their operations. The boards of both the private banks are meeting separately to fix the share-swap ratio and related terms. Following the development, the ICICI Bank stock shot up 12 per cent to Rs 170, and Bank of Madura by 8 per cent to Rs 131.60 on Friday, ahead of the announcement of the board meeting.

Analysts say the swap ratio could be in the region of 10 shares of ICICI Bank for every 13 shares of Bank of Madura, based on current scrip values of both banks.

The 57-year old Bank of Madura, with corporate headquarters in Chennai, is 25 per cent owned by K M Thiagarajan and 12 per cent by the Kotak Mahindra group. Financial institutions hold between five and six per cent and the balance is held by the public, largely from the Chettiar community. The bank's paid-up capital is Rs 12 crore, backed by reserves of Rs 274 crore. For the year ended March 31, 2000, it recorded a net profit of Rs 46 crore.

ICRA pegs GDP growth at 6.5 per cent
New Delhi: India's gross domestic product growth is expected to be around 6.5 per cent this fiscal due to slow pace of reforms and a lower than expected industrial growth, credit rating agency ICRA has in its latest report.

Without the long-outstanding reforms in public sector utilities, government finances and in the banking sector, 7 per cent growth rate and above is purely wishful thinking, ICRA said in its 'Money & Finance' report.

Earlier, Central Statistical Organisation (CSO) had estimated first quarter growth at 5.8 per cent, while the Reserve Bank of India scaled down the year's growth projection to 6 to 6.5 per cent, CMIE to 5.8 per cent and NCAER to 6.1 per cent, against the official projection of 7 per cent.

IDBI to bring down interest rate to 14 per cent
New Delhi: Industrial Development Bank of India (IDBI) has decided to reduce interest rate to 14 per cent across all sectors. According to the plan worked out for renegotiating interest rates, a borrower has to pay a certain proportion of the total interest burden-which varies from about 35 per cent to 75 per cent of the total interest amount due-to avail lower interest rates on the remaining loan amount.

Recently, IDBI reduced the rate of interest paid by Dabhol Power from 17 per cent to 14 per cent. IDBI chairman GP Gupta has said that the decision to lower interest rates from 17 per cent to 14 per cent as in case of Dabhol power project can be extended to all sectors, if the borrower agrees to 50 per cent pre-payment premium. While the proportion of pre-payment premium may vary from case to case it is usually in the range of 50 per cent of the total interest liability, say IDBI officials.

The decision is a part of the strategy to retain borrowers and also reduce the level of non-performing assets. IDBI officials said the decision has been taken after the institution found out that a number of its borrowers were able to avail loans at cheaper rates from other institutions and banks as the others are plush with funds. The present prime lending rate is 12.5 per cent and in sectors like power the institution lends at around 16 per cent.

8 December 2000

Record FDI inflows in October
New Delhi: India has received $626.7 million in foreign direct investment in October, the highest in any month in 2000, a government statement has reported. Total FDI inflows in January-October were $3.58 billion. The ratio of FDI approvals to inflows stood at 47.23 per cent.

Mr. Murasoli Maran, commerce and industry minister has recently told a meeting of the Foreign Investment Implementation Authority last September that he expects actual investment inflows in 2000 would surpass last year's $4.0 billion.

6 December 2000

Ten-year tax holiday for food processing on anvil
Mumbai: After giving tax holidays for the information technology sector, the government is now considering offering a ten-year indirect tax holiday for the food processing industry. Addressing delegates at the International Conference on Cold Chain Warehousing Mr Omesh Saigal, secretary, department of food processing industries has said that the finance ministry was now positively inclined to consider the proposal.

Tax holiday for the food processing sector industry, which was a high risk, low gain industry, would not only help the agricultural sector but also spur growth of country's gross national product, Mr. Saigal has said. He said a decision in this regard is likely to be taken up in the next budget session of the parliament. The proposed Processed Food Development Bill is currently before the parliament. The bill is seeking to create a single authority to administer all the food laws under a single umbrella.

The proposed tax relief measures would be mainly in terms of exemption from sales tax, octroi and excise. The approach paper towards formulation of a national policy on food processing industry has already identified tax levels on processed foods to be among the highest in the world.

5 December 2000

NCAER scales down GDP forecast to 6.1 per cent
New Delhi: The National Council of Applied Economic Research (NCAER) has warned of economic slow down, coupled with poor investment climate in the country.

Macro Track, NCAER's quarterly update says that GDP growth for the current fiscal is likely to be 6.1 per cent, down from the seven per cent expected earlier. It has also pointed out that higher import bill, largely due to the rise in international oil prices, would push the current account deficit to 1.4 per cent of GDP and also keep the rupee under pressure throughout the rest of this year. It has cautioned that inflation might be higher than expected at 7.1 per cent because of the hefty rise in oil prices.

The quarterly report has however said that silver lining was the high export growth that has helped pull up demand. The report noted that due to the slowdown in agriculture, growth of consumer durables, which have a significant rural demand component, have declined. The slowing down of industrial production despite high export growth points to the marked role that the domestic market continues to play in ensuring sustained industrial growth.

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