While headline inflation has been in double-digits for five months running and economic growth is expected to reach 8.5% this year, tight liquidity and continued uncertainty about global recovery are expected to prevent the Reserve Bank of India (RBI) from tightening policy more aggressively.

The RBI has raised rates three times this year by 25 basis points each, most recently in an unexpected move on July 2.

“My sense is unless we see a strong pick up in domestic demand both for credit, investment and for the economic activity in general, we might see a little bit of a softer approach towards policy tightening than initially thought,” said Saugata Bhattacharya, an economist with Axis Bank in Mumbai.

Most economists have not changed their expectations from a Reuters poll on July 5 that the RBI would raise the repo rate, at which it lends to banks, by another 50 basis points to 6% by end of December.

They expect the RBI to raise the reverse repo rate, at which it absorbs excess cash from the banking system, by 50 basis points by end-December.

Tight liquidity since early June has led economists to expect no change in the cash reserve ratio (CRR), the percentage of cash banks must keep in reserve with the RBI by end-December, compared with a 50 basis point rise expected in the July 5 poll.

Of 12 economists in the new survey who were also part of the previous poll, two have lowered their expectations on rate increases for the rest of the year, while three expect the RBI to tighten more aggressively than earlier forecast.

Twelve economists said the RBI’s policy tightening in recent quarters was appropriate, while four said the RBI should tighten more aggressively.

Most economists polled expect the repo rate to remain the RBI’s operative rate by the end of September, a sign that they expect tight cash conditions to persist. The RBI has allowed cash conditions to remain tight in recent weeks, which helps dampen inflation expectations.

Economists were almost evenly split on whether the repo or reverse repo would be the operative rate by the end of December.

Repo:

Seventeen of 20 economists expect the RBI to raise the repo rate in the July 27 policy review by a quarter-point to 5.75%. By the end of December, 10 economists expect a total of 50 basis points in increases in the repo rate and five expect 75 basis points of increase.

Source:-  Money control

Further commenting on the industrial production numbers for the month of May, RBS says it won’t alter estimates by big margins. “But we are cutting FY10 GDP growth estimate from 9% to 8.5%,” he states.

Going with the market expectation of a 25 basis points hike in rates by the Reserve Bank of India (RBI) in its July 27 policy review, a top official of RBS says he sees a further hike of 50 bps in 2010.

Source:- Moneycontrol

The steelmaker had sounded out investment banks to finalise a lead arranger for the offering, the newspaper said, citing bankers familiar with the development.

The funds would be raised in three or four equal tranches either by selling shares to institutions or through Global Depositary Receipts, it said.

“We will raise funds as and when we have a requirement,” a Tata Steel official told the paper.

Company officials could not be immediately reached by Reuters for a comment, but Tata Steel’s finance head, Koushik Chatterjee, had said in May the company was looking at options to raise equity and was seeking long-term funds for steel projects.

Source:- Moneycontrol

Mukherjee said, “The ordinance raises clearly the point that if there be a conflict between two regulators in respect of the hybrid jurisdiction, then this joint mechanism will interfere. A joint mechanism contains three members from the government, including the finance minister, and four members are the four regulators. Therefore the intention is quite clear. We are not going to interfere with the autonomy of regulators in their respective areas.”

The Reserve Bank of India or RBI, however, has protested against this joint committee saying it will prefer the current mechanism for dispute resolution which is the HLCC chaired by the RBI governor, reports CNBC-TV18′s Latha Venkatesh.

D Subbarao, Governor, RBI said, “The RBI has certain reservations and concerns, which we had expressed in a letter. The finance minister was kind enough to invite me for a discussion. However, the final decision is left to him. I reiterated our concerns tothe finance minister and he heard them kindly and he will take a final view because passing a law is the prerogative of the government.”

The RBI’s discomfort is with the format where a regulator is answerable to an executive body like the finance ministry. There are myriads of instances where they have to give up before a parliamentary committee. The RBI feels it could harm its regulatory independence. Globally, central bankers don’t defend products to ministers and does it only to parliament.

Also, the assumption that the finance minister comes with that there are only three government nominees including the FM and four regulators and hence we are in a majority, does not always work.

Some of the issues in the past where the RBI has had a problem include participatory notes and real estate mutual funds, which are not necessarily government versus all other regulators. Very often the RBI has tried to dodge an issue by either delay or by trying to create a public debate on an issue, which postpones the chance of a debate on issues with national importance.

The central bank prefers to be on the chair of the committee because it will give them the ability to monitor the progress of any issue.

S Narayan, Former Finance Secretary said, “During the budget the finance minister announced that there is going to be a joint committee, a supervisory regulatory committee. There is a lot of media criticism and argument about whether it is necessary or not.The finance secretary came out and said that this is only going to be a kind of talking shop or a kind of clearing house. We have gone back to a situation where you have a legislative body that can give directions to the regulator.”

Shankar Acharya, Former Advisor to the Finance Minister, “It is vitally important to preserve whatever is in the jury independence of the RBI and that is all absolute as well and perhaps more importantly, what is the de facto independence of the RBI on a wide range of matters. It would be important to avoid steps whether in the form of ordinance, which in some sense are seen to ride roughshod over this independence.”

Source:- Moneycontrol

This is the first case of divestment where both the Central and State Governments are divesting stake. Uptill now whatever issues have happened in the government’s current disinvestment drive it’s always been the Central Government that has divested its stake.

It is also learnt that there is a stock split in bonus likely in the manganese ore before the issue hits the markets and the bonus issue is likely to be in a 1:5 ratio. We will give you more details as and when the cabinet notice finalised and investment bankers are recruited. Right now this is the information we have.

Source:- Moneycontrol

Sources close to the development say that Piramal will retain one board position in Malvinder Singh promoted SRL. The deal is valued at approximately three times sales.  Piramal’s value is at around Rs 600 Crore. Piramal Diagnostics operates 124 diagnostic centres in 85 cities with over 400 sample collection centres, as per its website.

Piramal Healthcare has sold its domestic formulation business to US-based Abbott Laboratories for USD 3.7 billion last month.

Source :- Moneycontrol

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CNBC-TV18 learns from reliable sources that a whole host of domestic and international investors have bought into this block deal from Rabobank. Among the biggest buyer in the block deal is LIC. Capital Group, Carmignac, Morgan Stanley and China Investment Corp were some of the other buyers, added sources. There was interest shown by domestic mutual funds like Templeton Mutual Fund as well.

In a statement Rabobank said, “Rabobank is obliged under regulations to reduce its shareholding in Yes Bank pending approval of its application for a full banking licence in India. Rabobank is keen to establish its own banking presence in India. We are retaining a 4.9% stake in the bank.”

Rabobank, which held nearly 16% in Yes Bank before the deal, sold 37.3 million shares to a group of domestic and foreign institutional investors.

Source:- Moneycontrol

This comes after a series of bizarre events on Tuesday, where the extraordinary general meeting (EGM) that was called to approve the merger was first cancelled after a Kolkata civil court restrained the management from holding the EGM. This was based on a complaint filed by a shareholder who was against the merger. The bank then went ahead and informed the exchanges that the EGM has been cancelled following a court order.

However, some shareholders, including the former promoter PK Tayal went ahead and held the meeting chaired by a shareholder named DV Lakhani. And this merger resolution was put to vote.

In the meantime, ICICI Bank approached the Kolkata High Court and got a stay against the lower court order.

The results of voting were declared on Tuesday and that approved the merger with ICICI Bank.

Commenting on the issue, G Padmanabhan, Managing Director and Chief Executive Officer of Bank of Rajasthan, said, “We have only flagged certain issues to our solicitors so that they can come back and tell us that how to take the process forward. We have asked for a legal view and we are awaiting that. The management really wants to know whether whatever has been done is okay or not because the management has been endeavoring to implement the majority decision of the board yesterday itself in the EGM because of the court order we went slightly out of the loop. So we are only trying to ensure that the process is taken forward legally and appropriately.”

“The communication has been sent to the stock exchanges and what the stock exchanges do is up to them,” he adds.

Source:- moneycontrol

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