India's economy is seen growing at a faster pace in 2010/11 than earlier expected, supported by a global recovery, domestic demand and a double-digit expansion in factory output, a Reuters poll shows.
Such expansion will generate greater inflation than previously expected, requiring a steady series of rate rises from the central bank by the end of December.
Asia's third-biggest economy will grow at annual rates above 8 percent in coming quarters and is seen expanding 8.4 percent for the 2010/11 fiscal year, the survey of 20 analysts showed.
A similar quarterly poll in January had forecast growth of 8 percent. The poll showed that growth would accelerate in the fiscal year 2011/12 to 8.6 percent.
"A good pick-up in growth will depend upon good private demand and investment demand. Two factors sustaining growth in FY11 will be a normal monsoon and the level of global crude prices in the band of $70 to $80 a barrel," said Rupa Rege Nitsure, chief economist at Bank of Baroda. "Growth will gradually build up because real sector adjustment takes time," he added.
India's economy grew 6.7 percent in 2008/09, slowing from rates of 9 percent or more in the previous three years. The government has said it expects growth in 2009/10, or the fiscal year that ended on March 31, to have been 7.2 percent.
Analysts expect the Reserve Bank of India (RBI) to tighten policy further, raising the repo rate , at which the central bank lends to banks, by 100 basis points to 6.0 percent by the end of December from the current 5 percent.
Last month, the RBI raised the repo rate and the reverse repo rate , at which it absorbs excess cash from the banking system, by 25 basis points each. That took the reverse repo rate to 3.5 percent.
The rises were the first since the RBI began cutting rates in 2008. The central bank cited inflationary pressures and a steady economic recovery for the move. Fifteen out of 16 economists surveyed said the central bank would raise the repo rate between 25 and 50 basis points by the end of June.
All 16 expect the central bank to raise the repo rate by the end of December between 25 basis points and 125 basis points. "What the RBI seems to be doing is following a gentle trajectory," said Abheek Barua, chief economist with HDFC Bank.
"It will follow a calibrated approach and avoid coming across as aggressive when most other central banks are in a wait-and-watch mode," he added.
"Besides inflation, there are other concerns like bond yields, growth and government borrowing the RBI has to balance," Barua said.
Inflationary pressures strong
Economists expect inflationary pressures to remain strong in 2010/11 on high food prices, but they could abate by March 2011, the survey showed. The wholesale price index in February was 9.89 percent higher than a year earlier, marking the strongest inflation since October 2008.
The full-year average for wholesale price inflation is forecast at 7 percent in 2010/11, easing to 6 percent in 2011/12, the survey showed. In the previous poll, analysts had forecast 2010/11 wholesale price inflation at 5.8 percent.
The Indian rupee, which closed around 44.48 per dollar on Tuesday, is forecast to appreciate about 1.2 percent between now and end of December. It has already gained 4.7 percent so far this year.
Wednesday, April 14, 2010
Friday, April 9, 2010
PERFRMANCE OF INDIAN BANKS-MARCH 2010
The latest data released by Reserve Bank of India has reported that the Indian banks have been able to fulfill the target set for deposit as well as lending by RBI for the fiscal ended March 2010.
The banking industry reported a credit growth of 16.5% while the deposits grew at 17.1%. This shows that the banks have just touched the target of 16% credit growth and 17% deposit growth set by the RBI.
Scheduled Banks' Statement of Position in India, published by the RBI every fortnight showed that the loan book of banks for the fiscal 2010 amounted to Rs. 33.33 trillion as compared to the figures last year which read Rs. 28.6 trillion, thereby showing a growth of 16.5%.
The growth trend shown by Indian banks has raised hopes that they would be able to meet the target of 20-22% for FY'11.
The credit growth target set by RBI was revised twice last fiscal owing to global meltdown which forced Indian firms to slow the pace of operations and avoid taking credit.
With the scaling up of the economy, the firms are also on track of increasing their operations.
The credit growth of Indian banking industry stood at 27.6% in fiscal 2007, declined to 21.6% in fiscal 2008 and to 17.3% in fiscal 2009 and finally fell to a 12-year low of 9.49% in October 2009.
In correspondence to the recovery model pursuing in the economy, the banks have decided that any changes in rates would only be brought after the annual monetary policy has been announced.
The banking industry reported a credit growth of 16.5% while the deposits grew at 17.1%. This shows that the banks have just touched the target of 16% credit growth and 17% deposit growth set by the RBI.
Scheduled Banks' Statement of Position in India, published by the RBI every fortnight showed that the loan book of banks for the fiscal 2010 amounted to Rs. 33.33 trillion as compared to the figures last year which read Rs. 28.6 trillion, thereby showing a growth of 16.5%.
The growth trend shown by Indian banks has raised hopes that they would be able to meet the target of 20-22% for FY'11.
The credit growth target set by RBI was revised twice last fiscal owing to global meltdown which forced Indian firms to slow the pace of operations and avoid taking credit.
With the scaling up of the economy, the firms are also on track of increasing their operations.
The credit growth of Indian banking industry stood at 27.6% in fiscal 2007, declined to 21.6% in fiscal 2008 and to 17.3% in fiscal 2009 and finally fell to a 12-year low of 9.49% in October 2009.
In correspondence to the recovery model pursuing in the economy, the banks have decided that any changes in rates would only be brought after the annual monetary policy has been announced.
Sunday, April 4, 2010
Bank of Baroda's INDIA FIRST LIFE INSURANCE may break even by '2015
State-owned Bank of Baroda (BoB) today said that its insurance venture IndiaFirst Life Insurance that became operational four months ago would break even by 2015.
“We will expect this (IndiaFirst Life Insurance) company to break even by the next five years,” BoB Chairman and Managing Director MD Mallya said after inaugurating a GenNext branch here.
Mallya, who is also the chairman of the life insurance venture, said the company mopped up about Rs 250 crore since it commenced operations in November 2009.
MD Mallya IndiaFirst Life Insurance, the 23rd player in the life insurance space, is a three-way joint venture between Bank of Baroda, Andhra Bank and their British partner Legal & General.
Of the Rs 330-crore equity capital of IndiaFirst, BoB holds 44 per cent, Andhra Bank 30 per cent and the rest 26 per cent — the maximum permissible foreign direct investment limit in the sector — is with the British partner.
The insurance products are available at 1,750 branches of BoB and Andhra Bank across the country now. The insurer plans to expand its distribution to all 4,500 branches (combined branch strength of BoB and Andhra Bank) by the end of this year, he said.
BoB has 3,050 branches, some of which are overseas, while Andhra Bank has 1,544 branches across the country.
The company plans to initially focus on the bancassurance model, leveraging the existing customer base of the promoter banks, he said. The two banks have about five crore customers.
“We will expect this (IndiaFirst Life Insurance) company to break even by the next five years,” BoB Chairman and Managing Director MD Mallya said after inaugurating a GenNext branch here.
Mallya, who is also the chairman of the life insurance venture, said the company mopped up about Rs 250 crore since it commenced operations in November 2009.
MD Mallya IndiaFirst Life Insurance, the 23rd player in the life insurance space, is a three-way joint venture between Bank of Baroda, Andhra Bank and their British partner Legal & General.
Of the Rs 330-crore equity capital of IndiaFirst, BoB holds 44 per cent, Andhra Bank 30 per cent and the rest 26 per cent — the maximum permissible foreign direct investment limit in the sector — is with the British partner.
The insurance products are available at 1,750 branches of BoB and Andhra Bank across the country now. The insurer plans to expand its distribution to all 4,500 branches (combined branch strength of BoB and Andhra Bank) by the end of this year, he said.
BoB has 3,050 branches, some of which are overseas, while Andhra Bank has 1,544 branches across the country.
The company plans to initially focus on the bancassurance model, leveraging the existing customer base of the promoter banks, he said. The two banks have about five crore customers.
Saturday, April 3, 2010
NEW CHAIRMAN OF INDIAN BANK
T.M.Bhasin, on Thursday, took over as the new Chairman and Managing Director of Indian Bank. He succeeds M. S. Sundara Rajan, who retired on superannuation.
Prior to this assignment, Mr. Bhasin served as the Executive Director of United Bank of India (UBI). Mr. Bhasin is an MBA (Finance) from the University of Delhi. He is a Harvard alumnus, having done advanced management programme at JFK School of Government, Harvard.
Mr. Bhasin joined the banking system as a probationary officer on June 17, 1978 in Oriental Bank of Commerce (OBC) and served that bank for over three decades in various capacities. He has also authored a book titled “E-Commerce in Indian Banking” published by Authors Press, New Delhi (2002).
Prior to this assignment, Mr. Bhasin served as the Executive Director of United Bank of India (UBI). Mr. Bhasin is an MBA (Finance) from the University of Delhi. He is a Harvard alumnus, having done advanced management programme at JFK School of Government, Harvard.
Mr. Bhasin joined the banking system as a probationary officer on June 17, 1978 in Oriental Bank of Commerce (OBC) and served that bank for over three decades in various capacities. He has also authored a book titled “E-Commerce in Indian Banking” published by Authors Press, New Delhi (2002).
Credit Suisse Group (CS) a Swiss bank to open first BRANCH IN INDIA
Credit Suisse Group (CS) said Monday it has received an in-principle approval from the Reserve Bank of India to set up its first bank branch in the country, helping the Swiss bank expand its offerings in the world's second-fastest growing major economy.
The approval signifies also that the central bank is gradually opening up to foreign players. The RBI has often been accused of going slow in allowing greater access to such banks.
The approval signifies also that the central bank is gradually opening up to foreign players. The RBI has often been accused of going slow in allowing greater access to such banks.
Thursday, April 1, 2010
RBI will hike policy rates by 25 basis points: Goldman Sachs
The Reserve Bank will hike short-term lending and borrowing rates by 25 basis points each in its April policy review, Goldman Sachs ECS Asia Research said today.
It further said the odds for a 50 basis point hike have also increased with inflation hovering around double digits.
Policy rates need to rise by 300 bp (3 per cent) this year through a combination of rate hikes and tightening liquidity, it said.
"We continue to hold our view that effective policy rates need to rise by 300 bp to normalise policy, with 150 bp of rate hikes and 150 bp of tightening through liquidity withdrawal in 2010," Goldman said in a statement.
It said, "After an inter-meeting rate hike on March 19, we think the Reserve Bank of India will hike policy rates by 25 bp in the April 20 (annual monetary policy) meeting, and the probability of a 50-bp hike has increased."
The Reserve Bank recently raised the repo and the reverse-repo (short-term lending and borrowing) rates by 25 basis points each to 5 per cent and 3.5 per cent respectively, to contain inflation.
The central bank had also raised Cash Reserve Ratio (CRR), the amount that banks keep with RBI, by 75 basis points to 5.75 per cent in its last quarterly review.
Higher prices of milk and pulses have driven food inflation to 16.35 per cent for the week ended March 20, pushing overall inflation to near double digits.
The overall inflation, which includes variation in prices of food and non-food items, was 9.89 per cent in February and is estimated to cross double-digit mark soon.
In view of the rising prices of essential goods and the likelihood of the of food inflation spreading to manufactured goods, experts feel the RBI could take more measures in its forthcoming monetary policy on April 20 to contain price rise.
Meanwhile, the government today said that inflation could cross the 10 per cent mark in the next two weeks but exuded confidence that it would start declining from July.
"Wholesale Price Index (WPI)-based inflation will be around 10 per cent for March...it has psychological implications," Chief Economic Advisor Kaushik Basu told reporters here.
It further said the odds for a 50 basis point hike have also increased with inflation hovering around double digits.
Policy rates need to rise by 300 bp (3 per cent) this year through a combination of rate hikes and tightening liquidity, it said.
"We continue to hold our view that effective policy rates need to rise by 300 bp to normalise policy, with 150 bp of rate hikes and 150 bp of tightening through liquidity withdrawal in 2010," Goldman said in a statement.
It said, "After an inter-meeting rate hike on March 19, we think the Reserve Bank of India will hike policy rates by 25 bp in the April 20 (annual monetary policy) meeting, and the probability of a 50-bp hike has increased."
The Reserve Bank recently raised the repo and the reverse-repo (short-term lending and borrowing) rates by 25 basis points each to 5 per cent and 3.5 per cent respectively, to contain inflation.
The central bank had also raised Cash Reserve Ratio (CRR), the amount that banks keep with RBI, by 75 basis points to 5.75 per cent in its last quarterly review.
Higher prices of milk and pulses have driven food inflation to 16.35 per cent for the week ended March 20, pushing overall inflation to near double digits.
The overall inflation, which includes variation in prices of food and non-food items, was 9.89 per cent in February and is estimated to cross double-digit mark soon.
In view of the rising prices of essential goods and the likelihood of the of food inflation spreading to manufactured goods, experts feel the RBI could take more measures in its forthcoming monetary policy on April 20 to contain price rise.
Meanwhile, the government today said that inflation could cross the 10 per cent mark in the next two weeks but exuded confidence that it would start declining from July.
"Wholesale Price Index (WPI)-based inflation will be around 10 per cent for March...it has psychological implications," Chief Economic Advisor Kaushik Basu told reporters here.
WATERSHED DEVELOPMENT GRANT BY NABARD
According to NABARD, UP region has seen a record growth rate of about 40 per cent in the last financial year by providing a loan assistance aggregating to Rs 4,860 crore to banks and the state government as compared to Rs 3,465 crore given in 2008-2009.
In another important development, Mishra said for the coming financial year, NABARD has decided to convert loan-cum-grant worth Rs 34 crore given to UP under Watershed Development Fund into full grant.
In another important development, Mishra said for the coming financial year, NABARD has decided to convert loan-cum-grant worth Rs 34 crore given to UP under Watershed Development Fund into full grant.
NABARD WILL ASSIST FOR SEED TECHNOLOGY
he state regional office of National Bank for Agriculture and Rural Development (NABARD) will assist farmers in the state to produce quality certified seeds in the coming years.
NABARD is set to expand its pilot project “seed village” , which was started in five villages of Hamirpur district in Bundelkhand region, to 10 villages in Kanpur Dehat in the coming financial year.
Informing about the initiative on Wednesday, D P Mishra, Chief General Manager of NABARD, UP Region, said Rs 8 lakh has been sanctioned to the Indian Institute of Pulse Research to implement seed village concept in selected blocks of Kanpur Dehat. According to sources, around 19 districts in the state have been selected to implement this project in the coming years.
Mishra said: “The farmers usually get government supplied seeds in UP which are not in adequate quantity or they have to depend on procuring high quality seeds from other states.”
NABARD is set to expand its pilot project “seed village” , which was started in five villages of Hamirpur district in Bundelkhand region, to 10 villages in Kanpur Dehat in the coming financial year.
Informing about the initiative on Wednesday, D P Mishra, Chief General Manager of NABARD, UP Region, said Rs 8 lakh has been sanctioned to the Indian Institute of Pulse Research to implement seed village concept in selected blocks of Kanpur Dehat. According to sources, around 19 districts in the state have been selected to implement this project in the coming years.
Mishra said: “The farmers usually get government supplied seeds in UP which are not in adequate quantity or they have to depend on procuring high quality seeds from other states.”
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