RBI unlikely to cut key policy rate tomorrow: Bankers

The possibility of key policy rate cut is not bright as industrial output grew by 6.8% in January against just 2.5% in the previous month. Even inflation has firmed up to 6.95% in February from 6.55% in January. Besides, rising crude oil prices to $125 a barrel indicates a shift towards latent inflation

New Delhi: After having already cut the cash reserve ratio (CRR) by 0.75 percentage points last week, bankers feel the Reserve Bank of India (RBI) may not do much, especially with regard to reducing the interest rate, in its mid-quarterly review of monetary policy tomorrow, reports PTI.

The possibility of key policy rate cut is not bright as industrial output grew by 6.8% in January against just 2.5% in the previous month.

Even inflation has firmed up to 6.95% in February from 6.55% in January. Besides, rising crude oil prices to $125 a barrel indicates a shift towards latent inflation.

“I don't think that RBI would take further action in the policy review (on 15th March),” State Bank of India (SBI) chairman Pratip Chaudhuri said.

Last week, RBI slashed CRR, the percentage of deposits that banks have to keep with the RBI, from 5.5% to 4.75%. With this, the central bank had infused Rs48,000 crore into the economy.

This is the second reduction in the CRR since the 24th January policy announcement, when it had slashed CRR by 50 basis points releasing Rs32,000 crore into the system.

Repo or the short term lending rate of the RBI stands at 8.5%. Repo rate is the signalling rate. Other policy rates like reverse repo and bank rate adjust automatically with change in the repo rate.

Echoing similar views, Central Bank of India chairman and managing director MV Tanksale said the central bank will probably keep the monetary instruments untouched in the mid-quarter review.

However, some bankers feel that it is time for RBI to cut policy rate so that growth can be propped up which is on the path of moderation.

“There is immediate need for the RBI to shift to an aggressive growth supportive stance to address issues arising from fiscal and trade deficit. The need therefore is for the RBI to turn its focus away from CRR cuts to trigger rate cut actions,” IndusInd Bank head (ALCO and economic & market research) Moses Harding said.

The expectation from market stakeholders is unanimous but opinions are different on its timing; whether on 15th March or end of April 2012. If the decision is to a deliver rate cut; it is better to deliver it soon to cut short the lag time of transmission, he said.

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NMDC to acquire three assets abroad by June-July

"These are low-cost acquisitions and we have enough money to fund them," NMDC chairman said, when asked about the deal size for the properties in Mozambique and Australia.

After buying out Australian firm Legacy Iron Ore for about Rs92 crore last year, state-owned NMDC is eyeing to acquire three more overseas properties by June-July, a top company official said.

The three overseas assets on its acquisition radar include 26% stake in Brazilian iron ore firm Amplus for around USD 10-15 million and a coking coal mine in Mozambique, NMDC chairman N K Nanda told PTI.

“Of this, the agreement to acquire the Mozambique coking coal mine is likely to be signed by the end of the month. We are sending a three-member team there next week for site due-diligence,” he said, while declining to name the asset.

Besides, the state-owned iron ore miner is also looking to acquire 50% stake in Wonorah rock-phosphate reserve of Australian firm Minemakers, Nanda said.

“By June-July, we will be completing all the three acquisitions. Due-diligence for the properties has been initiated and is likely to be completed in next 45 days,” the NMDC chairman said.

"These are low-cost acquisitions and we have enough money to fund them," he said, when asked about the deal size for the properties in Mozambique and Australia.

The largest domestic iron ore miner has kept a budget of USD 500 million for overseas acquisitions.

For the deal with Amplus, NMDC has signed an exclusivity agreement (memorandum of understanding) with the Brazilian firm to invest in exploration of latter's iron ore reserves and provide its technical expertise.

"In lieu of our expertise and investments, they (Amplus) have offered us 26% stake. This will cost us around USD 10-15 million," he said, adding that Amplus holds iron ore reserves of about 1.5 billion tonnes.

Nanda further said that "subject to encouraging report of the due-diligence process, the stake can be increased up to 50%."

The other targeted property, Wonarah deposits of Minemakers, is one of the largest under-developed phosphate reserves in Australia, with an estimated resource of 1.26 billion tonnes at 12% phosphate. NMDC has an exclusivity agreement with Minemakers for acquisition of the property.

The Indian miner will be using Legacy -- its Australian arm -- to acquire the Wonarah deposits, Nanda said.

In the late afternoon, NMDC was trading at around Rs178.80 per share on the Bombay Stock Exchange, 0.28% down from the previous close.

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LG Balakrishnan & Bros to buy US-based company

The US-based company is engaged in manufacture of precision stamped metal parts.

LG Balakrishnan & Bros (LGBB) has signed a Letter of Intent (LOI) to buy major stock of a corporation in USA, engaged in manufacture of precision stamped metal parts. The closing of this transaction is planned for end June 2012 and is subject to customary regulatory approvals, satisfactory due diligence and other negotiated conditions of closing.

LGBB is mainly into automotive components and manufactures metal forming (fine blanking, forging, machined components and wire drawing) and transmission products such as chains, sprockets, tensioners and belts. Its forging products include steering linkage parts like ball rods, ball pins and ball sockets. It manufactures everything in-house, including steel rolling and tooling. Chains are precision components and require high-quality manufacturing. Its tools division is equipped with sophisticated CNC-wire cutting, spark erosion and micron CNC (computer numerical control) boring machines. Operations are vertically integrated.

In the late afternoon, LG Balakrishnan & Bros was trading at around Rs310 per share on the Bombay Stock Exchange, 0.48% down from the previous close.

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