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ANZ makes a re-entry into India, in a completely different avatar

ANZ’s Mumbai branch will initially support corporate and institutional banking clients in India and ANZ’s network clients looking to do business in the market, considering that India has now become Australia’s fourth-largest export destination, driven by rapid economic growth and demand for natural resources

On Thursday, 16th June, Australia and New Zealand Banking Group Limited (ANZ) announced the re-commencement of its banking operations in India with the opening of its first branch in Mumbai. According to a release from ANZ today, the entity will "support trade and investment flows between India and the Asia-Pacific region including Australia and New Zealand, as well as Europe and North America."

In October 2010, ANZ had received approval for a banking licence from the Reserve Bank of India, allowing ANZ to establish its branch in Mumbai in 2011.
ANZ, in a different avatar, has been involved with India's banking industry as ANZ Grindlays Bank. In 2000, Standard Chartered Bank—which then wanted a larger share in India's growth story—merged with Standard Chartered Grindlays Bank in 2002, and ANZ Grindlays Bank folded up as an entity in India.

The erstwhile ANZ Grindlays Bank was the largest foreign bank in India for a long period of time-it had 49 branches across the country in 1999. The Indian entity was generating the largest business for ANZ Grindlays Bank after Australia and New Zealand, though profit contribution to the parent's entity was only 9%. However, it made forays into funds management and asset financing.

Its arm, ANZ Investment Bank, had a number of firsts to its credit—it was involved in the divestment of Modern Foods to the erstwhile Hindustan Lever (now Hindustan Unilever); one of the principal arrangers to the $1.80 billion project finance for the second phase of the ill-fated Dabhol Power project and it had a highly skilled management team in place. Through its affiliate (ANZ Grindlays Asset Management Company Pvt Ltd), ANZ Grindlays launched its maiden income fund, Grindlays Super Saver Income Fund, in June 2000.

Today's announcement marks ANZ's return to India—but in a completely different avatar.

According to the release, ANZ's Mumbai branch will initially support corporate and institutional banking clients in India and ANZ's network clients looking to do business in the market.

ANZ India's CEO will be Subhas DeGamia, an old-time ANZ hand—he has over 20 years of experience with ANZ across institutional banking and financial markets, says the release. In the statement, ANZ CEO Asia Pacific, Europe and America Alex Thursby said, "The opening of the Mumbai branch re-establishes ANZ's banking presence in India and is a further milestone in our strategy to become a super regional bank. India is a major engine for global economic growth and its trade, investment and people connections with Asia-Pacific, including ANZ's domestic markets of Australia and New Zealand, are continuing to deepen."

The ANZ statement notes that India has become Australia's fourth-largest export destination, driven by rapid economic growth and demand for natural resources.

The Mumbai branch will provide a full range of forex banking services—including funding and hedging solutions, trade finance, cash and payments, foreign exchange and debt capital markets.

According to Mr Thursby, "The Mumbai branch will build on the strong familiarity that ANZ enjoys in India and the presence of our technology and back office processing centre in Bengaluru which employs approximately 5,000 people."


RBI hikes rates further to fight inflation; signals more increases

The Reserve Bank of India raises repo rate and reverse repo rates by 25 basis points. This is the 10th time that the central bank has hiked key policy rates since March 2010

The Reserve Bank of India (RBI) raised interest rates on Thursday for the 10th time since March 2010, saying it would continue to deal with stubbornly high inflation while balancing the adverse movements with global developments and their likely impact on domestic growth.

The RBI hiked the repo (short-term lending) and reverse repo (short-term borrowing) rates by 25 basis points each, which was in line with market expectations. The repo rate now stands at 7.5% and the reverse repo rate at 6.5%.

The marginal standing facility (MSF) has also gone up by 25 basis points to 8.5%. However, RBI has kept the cash reserve ratio (CRR) steady at 6%.

Today's rate increase followed a sharper-than-expected 50 basis point rate increase in early May.

"Notwithstanding both signs of moderation in commodity prices and some deceleration in growth, domestic inflation risks remain high," the central bank said in its mid-quarter policy review. "Against this backdrop, the monetary policy stance remains firmly anti-inflationary, recognising that in the current circumstances, some short-run deceleration in growth may be unavoidable in bringing inflation under control."

Headline inflation stood at over 9% in May, much above the central bank's comfort level of 5%-6%. The policy initiative, the RBI said, "is expected to contain inflation and anchor inflationary expectations by reining in demand side pressures."

"Domestically, inflation persists at uncomfortable levels. Moreover, the headline numbers understate the pressures, because fuel prices have yet to reflect global crude prices," the RBI said. The measures would help in mitigating the impact of "potentially adverse global developments."

The main drivers of inflation in April-May 2011 were non-food primary articles, fuel and non-food manufactured products. Non-food manufactured products inflation stood at 8.5% in March, and it increased from 6.3% in April to 7.3% in May 2011, much above its medium-term trend of 4%.

"This pattern in non-food manufactured products inflation is a matter of particular concern. Besides reflecting high commodity prices, it also suggests more generalised inflationary pressures (and that) rising wages and costs of service inputs are apparently being passed on by producers along the entire supply chain," the RBI said.

Food inflation, however, declined marginally to 8.96% for the week ended 4th June from 9.01% in the previous week. The RBI said that given the recent pattern, the inflation numbers for April and May are likely to be revised upward.

It pointed out that the impact of its recent policy initiatives was still unfolding. With inflation expected to only get uglier in the coming months, particularly if the government decides to raise the price of diesel and cooking gas to ease the cost of subsidies, the RBI will only have to persist with its anti-inflationary stance.


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