Rupee gains slightly
Mumbai: The rupee gained by almost three paise on Wednesday as exports sold dollars. The rupee opened at 44.13 on India's rating being upgraded to "investment grade" by the international ratings agency, Standard & Poor's and touched an intra-day low of 44.21 and finally closed at 44.18/19 against previous close of 44.20/21.

The six-month forward premia closed at 3.52 per cent (3.87 per cent) and the one-year at 3.08 per cent (3.22 per cent).

Bonds: Bond prices rallied by more than a rupee with the RBI hiking the repo rate and leaving all other key policy rates unchanged.

G-secs: The 8.07 per cent-10 year-2017 paper opened at Rs101.23 (7.89 per cent YTM) and closed at Rs102.37 (7.72 per cent YTM), up from the previous close at Rs101.14 (7.90 per cent YTM).

The 7.59 per cent-9 year-2016 paper opened at Rs98.14 (7.87 per cent YTM) and closed at Rs99.11 (7.72 per cent YTM), against the previous close of Rs97.97 (7.90 per cent YTM).

Call rates: The call rate closed 7.70-7.80 per cent (7.70-7.90), higher than the RBI repo rate of 7.50 per cent.

Reverse repo: In the first two-day reverse-repo auction under LAF, the RBI received no bids and in the repo auction 30 bids for Rs12,595 crore were accepted. In the second two-day reverse-repo auction, the RBI accepted and received five bids for Rs115 crore and in the repo auction, five bids for Rs1,415 crore.

CBLO: The CBLO market saw 338 trades aggregating to Rs17,671.80 crore in the 7.09-7.85 per cent range.
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RBI raises repo rate by 25 bps
Mumbai: In order to contain inflationary trends persisting in the economy the RBI on Wednesday raised the price at which it lends money to banks against securities under repo by 25 basis points to 7.50 per cent. At the same time, the central bank raised growth projections for the current fiscal to 8.5-9 per cent over its last estimate of 8 per cent. All other key rates were left unchanged.

The RBI Governor, Dr YV Reddy raised provisioning on standard assets against loans to the real estate sector, outstanding credit card receivables, loans and advances qualifying as capital market exposure and personal loans to two per cent from one per cent. Provisioning for loans to housing, agriculture, SMEs and industry remain unchanged.

Banks will now have to provide two per cent (existing 0.4 per cent) on exposures in standard assets to non-deposit taking NBFCs while the risk weight goes up to 125 per cent from 100 per cent.

At a press conference, the RBI Governor said the focus was on price stability and credit quality. Dr Rakesh Mohan, deputy governor RBI said the central bank would not hesitate to use all policy instruments, including CRR, to manage liquidity.

According to the Reserve Bank the Third Quarter Review of Annual Statement on Monetary Policy for 2006-07 wants to douse "inflationary expectations" by sticking to the 5-5.5 per cent band. The bank also expressed its concern over the uneven farm performance.

It said industry and services sector are growing at a hopping pace while agriculture growth "has not been as sanguine" with output dropping in the first half of 2006-07 over that a year ago. Supply-side pressures due to "declines in the production of rice, coarse cereals, oilseeds, pulses and cotton have emerged as a source of concern for the near-term outlook, especially in view of the relatively low levels of food stocks the bank said.

The bank is discouraging foreign deposits by pruning interest rate ceilings on NRE and FCNR(B) deposits by 50 and 25 basis points respectively. Also, banks have been prohibited from granting fresh loans in excess of Rs 20 lakh against these deposits.
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Home loans not to be affected for the present
Chennai: After the announcement of the RBI policy review its clear that home loan rates will not rise for now. The measures, including raising risk weights and increasing the provisions made by banks, are aimed specifically at bank lending towards commercial real estate. The RBI is not comfortable with the kind of credit growth seen here and is clearly trying to steer banks away from that sector. Residential housing loans would not be affected.

According to Dr Y.V. Reddy, RBI Governor, while the RBI would not take a view on asset prices, it could not allow a situation where a bubble was built and allow it to burst later. It had to take pre-emptive action and the steps announced were in that direction.
He emphasised strongly that the measures announced were aimed at containing inflation but did not endanger growth. On the contrary, high inflation would give rise to imbalances and distortions, he said.
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PNB float to cut Govt stake to 51 pc
New Delhi: Punjab National Bank (PNB) plans to float a public issue next fiscal that could result in offloading of 6.8 per cent of the Government's stake, currently at 57.8 per cent.

The bank had last tapped the capital market through a follow-on public offering in 2005. PNB also plans to mop up additional tier-II capital of at least Rs500 crore by March this year to fund its overseas expansion as well as business growth in the country. The bank has already raised Rs2,000 crore in the form of tier-II capital in the current fiscal.
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