High inflation, deficient rains may prevent RBI from cutting rates

Although bankers expect RBI to cut CRR, the inflation at 7%, uncertainty over monsoon may play the spoilsport

New Delhi: In view of high inflation and deficient monsoon rainfall in India, the Reserve Bank of India (RBI) may find it difficult to cut the key lending rate to boost the economy as is being demanded by the industry, reports PTI.
Although bankers expect RBI to cut cash reserve ratio (CRR) by up to 0.5% in the monetary policy review on Tuesday, it would not be possible for the central bank to heed to India Inc's demand as inflation, at over 7%, is much above its comfort level.
Moreover, uncertainty over monsoon is likely to put pressure on prices of essential commodities. On an average, rainfall deficiency across the country is 21% so far.
RBI Governor D Subbarao will unveil the first quarter policy review and if his recent comments on inflation as well as fiscal and current account deficit numbers are any indication, it may turn out to be a non-event.
While GDP growth hit a nine-year low last fiscal at 6.5%, WPI-based inflation was at 7.25% in June. Retail inflation is hovering at 10.02%.
RBI had left policy rates and CRR -- a portion of deposits that banks are required to keep with the central bank -- unchanged at the last meeting on 16th June.
Meanwhile, Subbarao said recently that RBI will study the relationship between high interest rates and growth slowdown.
Bankers, meanwhile, have said that they expect a 0.5% reduction in CRR, which currently stands at 4.75%. They, however, do not see a reduction in the repo rate from the current 8%.
"We expect a 50 basis point reduction in CRR to ease money supply. Also a CRR cut will have a cooling effect on the interest rates for customers apart from better effect on monetary transmission than a repo cut," State Bank of India Chairman Pratip Chaudhuri said.

Sonal Varma and Aman Monunta, economists, Nomura said, "We expect the RBI to keep policy rates (repo, reverse repo) unchanged, in line with consensus expectations. While growth remains weak, upside risks to inflation have risen due to a deficient monsoon. We expect the RBI to maintain its WPI inflation projection at 6.5% by March 2013. However, with food prices on the rise, the central bank could highlight upside risks to its projection".


Yes Bank Managing Director Rana Kapoor said, "I think the chances of repo rate cut happening are less as inflation has taken a pole position in RBI's thinking again."

Chairmen of Central Bank and Union Bank, M V Tanksale and D Sarkar, however, held the view that RBI could go in for cut in CRR to unlock funds and ease the liquidity situation.


RBI had said in its previous policy review that any further action on the monetary policy front would depend on government's fiscal consolidation initiatives.


However, with four months of the fiscal already over the government has yet to announce roadmap to contain the subsidy bill.



iGATE targets $900 million revenue from iTOPS biz by 2017

iGate CEO Phaneesh Murthy said the company is looking at $3 billion revenues by 2017, from over $1 billion at present 

Tiruchirapalli (Tamil Nadu): IT company iGATE has said it is targetting $900 million revenues over the next five years from iTOPS (integrated Technology and Operations) business that will be the key growth driver for it in the coming years, reports PTI.
Overall, the US-based company is looking at $3 billion revenues by 2017, from over $1 billion at present, iGate CEO Phaneesh Murthy told PTI from Freemont, California.
"We are seeing increased acceptance of our outcome based model among both existing customers as well as the prospects that we are talking to. Currently, about 10% of our business comes from outcomes based model. We would like this to go up to 30% in five years," Murthy said.
He said iGate's intent is to achieve faster growth, with focus on signing large deals. "We are currently in the midst of two such large $100-million-plus deals and our target is to see a closure on at least one of these two deals this year".
On the earnings front, Murthy said he wanted iGATE to be the best earnings company in the industry in five years.
Asked about hiring for this year, given the slowdown in the industry, he said iGATE plans to recruit 3,000 persons this year in addition to its existing employee base of over 27,000.
So far this year, Manufacturing, Retail, Distribution and Logistics (MRDL) have been a key growth driver for iGATE. "We are seeing a lot of bump ups here in the MRDL space." 
On the scenario in BFSI (Banking, Financial Services, Insurance), the single biggest vertical for the Indian IT industry, he said he expects IT spending in the sector to pick up in the coming two quarters. BFSI has started a slow comeback in second quarter.
"My estimation is that the BFSI sector will recover by the end of the year," Murthy said.
When asked about Nasscom's projection of double digit growth for the IT industry this year, he reiterated his earlier stand of this year being single digit growth for the industry.
"For the industry to achieve double digit growth, companies have to post spectacular results in the last two quarters to offset slow growth in the first two quarters of this calendar year.
"I do not see that happening, especially given the coming elections in the US and consequent impact on outsourcing and with Europe showing no signs of recovery in the near future." 
He was more bullish on prospects for 2013.
"I expect the next year to be a recovery year for the US economy and as a result from an Indian IT industry point of view, next year would be a better year than 2012," he added.


Oriental Bank of Commerce Q1 net profit up 10% to Rs391 crore

While OBC's total revenues increased 54% to Rs4695.5 crore, its NPAs also rose to about 3% from 2.1%

New Delhi: Oriental Bank of Commerce (OBC) on Monday reported 10.3% rise in net profit to Rs391.4 crore for the first quarter ended June 2012, reports PTI.
The public sector bank had posted a net profit of Rs354.7 crore for the first quarter (April-June) of the previous fiscal, OBC said in a BSE filing.
The total income of the bank increased by 54% to Rs4,695.5 crore from Rs3,920.3 crore in the corresponding year-ago period.
Interest income of the bank rose to Rs4,287.16 crore during the period under review from Rs3,596.5 crore in the same quarter of the previous fiscal.
OBC's gross non-performing assets (NPAs) increased to 2.97% during the quarter ended 30th June from 2.07% in the same quarter a year ago, it said.


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