Expect some capital infusion from GoI in FY13: IDBI

In an interview to CNBC-TV18, BK Batra, Deputy Manager of IDBI spoke about the latest happenings in the ban and the road ahead. He expects credit growth to pick up in the last quarter. However, the bank may end up clocking a growth of around or a little below industry growth of 15 percent.

Further, he added that the government of India may infuse some funds in the bank in FY13. “We are comfortable right now but the requirements are going to go up from January 1 under Basel III regime. We are also in clue before the government asking for supplementing our capital,” he added.

Below is the edited transcript of his interview to CNBC-TV18

Also read: RBI’s rate easing & Q3 earnings to drive market: PN Vijay

Q: How do you see volume of business growing? That’s been the sore point and it’s been a particular problem with your own bank. Is there any improvement at all and when would you expect it to improve?

A: As far as our bank is concerned right from beginning we had not targeted any high growth. We have been following a policy of calibrated growth because we needed to look at the composition of our portfolio. We have been trying to actually change the mix which was heavily loaded in favour of corporate loans to retail loans. In that pursuit we have kept our growth target lower than the industry levels.

However, so far it looks that it will be lower even than what we had thought it to be at the beginning of the year. Overall credit growth in the banking sector also has been lower than what was projected. What was projected was more than 17 percent but it has been so far around 15 percent year on year. We are expecting that maybe there will be an up tick in the last quarter and it may still end up around 15 percent. But we are expecting our own growth to be somewhat below or between that.

Q: IDFC is taking over Delhi-Gurgaon expressway asset and there were reports that even you maybe looking at that asset. Now your denial has come through, you are not interested but are banks getting increasingly wary about lending to these road projects?

A: I think it is a case of looking at individual projects. As far as this particular project is concerned we have not been connected with it and we have no proposal before us to get associated with it. However, if there are any other road projects or similar projects where we need to look at their refinancing or securitization after they have become operational, we have been open to it. We will continue to be open to it, in fact that is a good financing opportunity when the project has been implemented. The risk is lower and there is clarity on what is the revenue already and what is it going to be. Therefore, one can make fairly good assessment of the credit.

Q: The industry might not concur because National Highways Authority of India (NHAI) has not been able to award a lot of projects this year particularly because a lot of the already awarded projects are not be able to achieve financial closure. This area, the road segment could be a problem area. Aside of that is there any other area that you feel could still come under stress because a lot of bankers point out the asset quality usually comes up with a lag, there could be problem issue still?

A: I agree that very few new road projects are getting added to the portfolio. However, what I was talking about was the existing implemented roads, where banks have investment. For asset liability reason some of them might also get it refinanced. That is something which can be an interesting source of investment. As far as other sectors are concerned, we are all aware there have been stresses. This was due to various reasons related to implementation of those projects in particular power projects.

India new bank capital rules to start in April: RBI

India will start implementing new global capital rules for banks, known as Basel III, from April 1, 2013 rather than the beginning of January, the Reserve Bank of India (RBI) said on Friday.

It said this would align the introduction of the rules with the start of the country’s tax year, which runs from April to March. The RBI gave no other reason for the change.

The new rules have been created by international regulators to strengthen banks after the financial crisis. Under the Basel III regime, India’s banks will have to hold core capital of at least seven percent of (risk weighted) assets.

The central bank had originally said in May that implementation of Basel III would begin in January. The new rules are set to be fully implemented by the end of March 2018.

Reversal in monetary policy only when inflation down: PMEAC

The signal for reversal of monetary policy stand by the Reserve bank will come only when inflation shows definite signs of decline, Prime Minister’s Economic Advisory Council chairman C Rangarajan said today.

He also said that high inflation over the last couple of years was due to supply side constrains but that did not mean that monetary policy had no role to play in such condition. Rangarajan was delivering the P R Brahmananda Memorial Lecture on ‘Dynamics of Inflation’ at a conference by the Indian Economic Association.

“It is true that the extraordinarily high level of inflation in the last three years was due to severe supply side constrains, particularly of agricultural products, but that did not mean that monetary policy or for that matter fiscal policy had no role to play in such conditions,” he said.

The PMEAC chief added: “Food price inflation, if it persists long enough, gets generalised. Non-food manufacturing inflation has also remained high since April 2010 and at times crossed 8 per cent, despite a declining growth rate. Thus, monetary policy, alongwith fiscal policy. has to play part in containing overall demand pressures.”

The changes in the monetary policy cannot have a direct impact on food inflation but it can have a moderating influence by containing demand pressure, he stated. Maintaining that inflation level of 5 per cent is acceptable in the Indian context, Rangarajan said the present level was way above acceptable limit. It might take more than a year to bring it down to 6 per cent, he added.

Rangarajan said: “The signal for reversal of the policy will be given when inflation showed definite signs of decline”. A former RBI governor, he also said that since the beginning of 2012-13 fiscal, there has been no tightening but only easing of policy in small steps. He said the contention that high growth warranted high inflation was wrong, pointing out that in the three years when the country grew at more than 9 per cent, the average inflation was only 5.2 per cent.

The inflation based on Wholesale Price Index in November was 7.24 per cent. During 2012, the highest rate of price rise was witnessed in August when inflation stood at 8.01 per cent. However, retail inflation, based on Consumer Price Index remained close to double digit at 9.90 per cent in November.

The government expects inflation to moderate during the January-March quarter and March-end at 6.8-7 per cent. Although it would still remain above the RBI’s comfort level of 5-6 per cent, a rate cut is on the anvil as RBI is expected to work towards boosting growth.

The central bank had hiked key policy rates 13 times by 3.75 per cent between March 2010 to October 2011 to tame the rising inflation. As inflation showed some signs of easing thereafter, RBI lowered policy rates by 0.50 per cent in April 2012.

Global telecom treaty without Net, signed by 89 nations

An international telecommunications treaty signed by 89 countries out of a possible 144 on Friday will have little impact on how carriers operate or how consumers surf the web or make calls around the world when it comes into effect in 2015.

But the acrimonious debate over the treaty – and refusal of so many countries, including the United States and much of Europe, to sign up immediately – have exposed a deep split in the international community.

A US-led bloc advocated a hands-off approach to the Internet , while Russia, China and much of Africa and the Middle East sought greater governmental oversight of cyberspace.

About 150 nations met in Dubai, under the auspices of the International Telecommunication Union (ITU), to update a set of telecom rules dating back to 1988, before the Internet and mobile phones transformed communications. Their failure to find a consensus may herald a new fight over cyberspace.

“The world will still be around and countries will still cooperate along the lines they have done for decades,” said Paul Budde, managing director of Sydney-based consultancy BuddeCom. “However, they have clearly drawn a line under how far they believe the ITU can go in relation to regulations that include the Internet.”

As in a prior version, the International Telecom Regulations spell out guidelines on technical issues such as how carriers charge each other for incoming international phone calls, as well as taxation and accounting.

Countries that sign the treaty are supposed to be guided by its principles, although these have no force of law.

Users in countries that block certain content will still experience the same version of the Internet, while telecom operators will feel little impact because international call charges are decided via commercial contracts between them.

The new version added passages that became flash points: for example, four lines pushed by Russia and China on how governments should protect the security of networks.

The United States took a no-compromise position throughout negotiations, refusing to consider any references to the Internet in the treaty. Other countries instead agreed to restrict any explicit Internet provisions to a non-binding resolution that accompanies the treaty.

In the end, the debate over the Internet overshadowed all else at the summit, despite the ITU insisting that regulating cyberspace was not on the agenda.

As a result, some countries in Africa and the Middle East felt the controversy overshadowed important reforms, such as provisions to improve broadband access to landlocked and island nations, which may be weakened by fewer countries signing the treaty.

Other measures include a call for greater transparency in roaming charges, which the ITU hopes will end “bill shock”, plus commitments to improve disabled access to telecom services and for governments to reduce telecom equipment waste.

A clause calling for countries to stop “unsolicited bulk electronic communications” – spam – drew the ire of the US bloc, which said it could be interpreted by governments to block emails, an accusation the ITU vehemently denied.

“Whatever is in place now doesn’t seem to be working and this treaty calls on governments – it’s a dirty word for some, but somebody has to do it – to cooperate to see what we can do better in that area,” said Richard Hill, chief counselor for International Telecommunication Union’s Dubai summit.

These issues are more vital in developing countries, with other countries having already addressed them to a large extent, so richer nations had less incentive to sign the treaty.

“That’s certainly the case, but it’s no secret they’re not signing for political reasons,” added Hill.

After 12 days of rancorous, largely private negotiations, the bad feeling between the two opposing camps may take some time to ease. Delegates from the pro-treaty group accused the United States and Europe of reneging on a compromise agreement that fell apart on Thursday.

ITU officials on Friday gave an upbeat interpretation of the summit, predicting many of the countries that had yet to sign the treaty would do so once they have consulted with their respective legislatures. But the failed attempts by some member states to significantly extend the ITU’s remit into the Internet have weakened the 147-year-old organisation.

“The ITU won’t become irrelevant but it tried to claim some of the Internet without having the mandate to do so,” said a European delegate who declined to be identified. “It saw an opportunity, but both the triumph and the curse of the ITU is that it can’t instigate anything, it depends on member states – some said let’s expand the mandate and others said let’s not.”

Committed to put economy back on high growth path: PM

Amid global slowdown impacting India as well, Prime Minister Manmohan Singh today said the government is committed to do everything to put economy back on a high growth path of 8-9 per cent.

“The steps we have taken recently are only the beginning of the process to revive our economy and take it back to its trend growth rate of 8-9 per cent,” Singh said at the 85th Annual General Meeting of Ficci here. He said the global economy is passing through turbulent times and “excessive pessimism” at home has hurt the country’s growth process.

“But I stand before you to reassure you that our government is committed to doing everything that is possible to alter the policy environment, accelerate economic growth and make the growth process socially and regionally more
inclusive,” he told the industry captains.

The economic growth slowed to a nine year low of 6.5 per cent in 2011-12 and this year, too, the GDP growth, as per RBI’s estimates, is likely to be 5.8 per cent. In the three years preceeding the 2008 global economic crisis, India was
growing at a rate of more than 9 per cent.

The Prime Minister further said the government needs to take forward the steps it has taken through constitution of Cabinet Committee on Investment to revive the economy. “We need to complete the exercise that has begun on GAAR (General Anti Avoidance Rules) and taxation of the IT sector…We will speed up the disinvestment process which will also revive our equity markets,” he added.

Liberalisation of foreign direct investment norms in sectors like multi-brand retail and aviation and cutting subsidies on petroleum products are some of the key economic reforms undertaken by the government in the recent past.
In an apparent dig on parties which oppose reforms, the Prime Minister said: “Some of the decisions we have taken were politically difficult and the naysayers and the cynics have tried to halt us in our track, but we had the courage of our conviction and the interests of our people at heart”.

Advance tax: SBI pays Rs 1701cr, HDFC Rs 560cr in Q3

State Bank of India has paid marginally lower advance tax in the third quarter at Rs 1,701 crore against Rs 1,730 crore in the corresponding period last year, tax officials said today.

The dip, which comes amidst gloomy economic climate, was also reported by SBI’s peer Bank of India , which paid Rs 120 crore in the reported quarter against Rs 125 crore it paid in the year-ago period.

Bank of Baroda and Central Bank , however, paid higher advance tax this quarter. While Bank of Baroda paid Rs 550 crore compared to Rs 525 crore in the corresponding period last year, Central Bank paid Rs 120 crore against Rs 104 crore last quarter.

Mortgage major HDFC paid Rs 560 crore in advance tax against Rs 475 crore last year, up 18 per cent over corresponding quarter, they said.

Although the deadline for filing advance tax returns is December 15, some companies opted to make the payment today due to week-end consideration.

Advance tax is a staggered way of paying income taxes through the year. It is generally taken as a barometer to a company’s earnings for the period.

India will see another ‘harsh’ year in 2013: Kaushik Basu

India will see another ‘harsh’ year in terms of economic growth in 2013 as the European situation “will remain very difficult up to end of 2014″, World Bank Chief Economist Kaushik Basu today said.

“Next year will also be very harsh (for India)…the European situation will remain very difficult up to end of 2014 and may be to the beginning of 2015.

“And Europe is a very major player, so that is going to rub off on India. The growth scenario will be difficult,” Basu told reporters on the sidelines of Delhi Economic Conclave here.
However, Basu, who from December 2009 to July 2012 served as the Chief Economic Advisor to the Government of India, said the country in next two years may get back to the 8-9 per cent growth rate at which the economy was expanding before the 2008 global economic crisis.

“Give India two-three years. India has enough fundamental strength that if you work towards these, then really there is no reason why India can’t get back to 8-9 per cent growth,” Basu said.