What made Niira Radia shut India’s largest public relations group?

Source : BS :Surajeet Das Gupta / New Delhi November 12, 2011, 0:13 IST






On October 18, in the morning, Niira Radia called her top executives to her Taj Wellington Mews residence in Mumbai. As they trooped into a room, the central attraction of which is a large Ganesha, most of them sensed she wanted to get out of the daily grind of business: public relations agencies Vaishnavi and Nucom, and government affairs consultancy Noesis. She had worked round the clock for almost ten years, gone through ups and downs, and built a business of almost Rs 100 crore. 


So, maybe she wanted to take life easy. What she announced left some of them very surprised: she had decided to shut the business on November 1, the day of Vaishnavi’s 10th anniversary and a day after her contract with Tata Group would have expired.


She wouldn’t leave her people in the lurch, she said. While many would be absorbed in Reliance Industries, the bread-and-butter customer of Nucom, those left without a job would get three months’ salary. “We were signing accounts as late as the first week of October when we took on board a Titan Industries subsidiary. 


We had readied contracts for some non-Tata companies which would start from November,” says a senior Vaishnavi executive.


Radia’s decision to close shop was as dramatic as her entry into the country’s close-knit world of public relations. A non-resident Indian from UK, who had closed her travel agency and had started with zilch experience of media management, she made Vaishnavi the country’s largest public relations agency — nearly double the size of its nearest competitor. 


And in the ten years she handled premium accounts like the Tata group and Reliance Industries, she did not hesitate to take on media houses, industrialists , politicians, and of course, Anil Ambani head on. She also changed the norms of the business. 


Her senior executives travelled business class, stayed at luxury hotels and got paid higher than rivals. She would quote sometimes over 50 per cent higher than her rivals and still grab the account. In her heydays, Radia even charged over Rs 10 lakh a month when most others would be elated at half the amount. From public relations, she expanded into corporate affairs and even handled corporate social responsibility for those who were willing to pay.


* * *


So why did she suddenly close? Detractors say the Radia tapes leaked last year dented her image in a business where reputation matters more than anything else. Her conversations with journalists, bureaucrats, businessmen and ministers created the image of an all-powerful lobbyist. What stood out in the conversations was her anxiety to get A Raja, who had got fully embroiled in the 2G spectrum controversy by now, the telecom ministry after the United Progressive Alliance came back to power in 2009. (Ratan Tata would later admit that he had a “chemistry problem” with the other candidate for the post, Dayanidhi Maran.) Raja indeed got the job. Journalists dismissed their conversations with Radia as casual banter to extract information from her. Her role in the controversy was also examined by the Central Bureau of Investigation and the Enforcement Directorate (for violation of foreign exchange laws). Both the agencies gave her a clean chit, but the damage had been done. “What matters is the perception, not the reality. Rajat Gupta might not be found guilty by the Securities Exchange Commission (for passing on insider information to Raj Rajaratnam of Galleon) but which company will re-induct him on its board?” asks a public relations veteran.


The controversy impacted her business as well; some of her customers who left included multinational corporations like Lavazza and Schneider Electric, apart from the Confederation of Indian Industry (its former director general, Tarun Das, got into a controversy because of his conversation with Radia). All told, she lost 10-15 accounts after the controversy broke out, say insiders who worked with her. But that would not have made a serious dent because the Tata group and Reliance Industries, which contributed over 80 per cent to her business, stood by her. The Tata contract was coming up for renewal on October 31. Insiders say that the contract had one key clause: Radia should run the business and drive the account personally for the next five years. But Radia was clear that she did not want to be involved in running the account personally anymore, though insiders say she was not averse to her team continuing the business while she stayed invested. The end result could be only one: close down.


Many would argue that she could have easily sold off the agency; after all, just a few months before the tapes controversy, she had talked to private equity funds and an international public relations agency to sell some stake. And there were many unsolicited partnership offers. But Vaishnavi would not have got the valuation without the Tata mandate. Also, any buyer would have tied her in the business for some years as a precondition for sale, which was not acceptable to her. The controversy had reduced her appetite for a fight. “For many years a few vested interests have been trying to harm Vaishnavi and me personally. Till the recent past I would fight back, survive and probably react. But today I want to give them their victory and let them savour it,” she said in an email to her employees.


But was there some disconnection between the Tata group and Vaishnavi after the tapes were made public? Radia declined to talk for this article. But there are some pointers. Last year, a few weeks after the tapes had become public, a team of senior Tata executives went to media houses to get their assessment of how the Tata name had been dented. There was nobody from Vaishnavi in that team. Subsequently, Ratan Tata said in a television interview that while there was no conflict between his group and Mukesh Ambani’s Reliance Industries at the moment, there could be one in the future: telecom. So, Radia has to take a call. “Tata defended his group but he never defended the conversations Radia had, many of which were industry issues,” says a senior government official. “Radia was not working for us alone,” Tata told the Public Accounts Committee of Parliament. “She has been a supporter of Raja in many ways.” Thus, in her email to her employees, Radia mentioned that Reliance Industries would absorb 30 of them; there was no such commitment from the Tata group, though some insiders say that it may absorb some members of her team. Radia’s contract with Reliance Industries, incidentally, had two more years left.


* * *


It all started in the late 1990s when, after briefly helping Subrato Roy with Sahara Airlines, Radia set up Crownmart, an aviation consultancy, which did business with Singapore Airlines. Around the same time the government wanted to sell 40 per cent in Air India. Singapore Airlines decided to bid for the stake with the Tata group. In order to work out the details of the partnership, it sent Radia to meet Tata. She was given 20 minutes but the meeting went on for two hours. Tata has never spelt out what he liked in her, but Radia talks confidently and comes across as well-informed and energetic. The Air India divestment never happened. But Tata, impressed by her knowledge of the aviation business, offered her to take up the public relations mandate of his group.


Before she came in, the Tata group had over 14 public relations agencies without any clear direction from the top. Tata now consolidated the work and gave it to Radia. This was also the time when he was looking at consolidating the group’s identity with a common logo and began to go global with a string of high-ticket acquisitions (Tetley, the trucks business of Daewoo, Corus and Jaguar & Land Rover). Just six months into the job, Radia was called to douse the fires caused by the ouster of Tata Finance managing director Dilip Pendse — considered close to Tata — for alleged misappropriation of funds. It was while handling the telecom business of Tata that she realised the importance of building bridges with the government and the bureaucracy, say insiders. The Tata group had a public spat with late Pramod Mahajan, the telecom minister from 2001 to 2003, when he attacked VSNL (which the Tata group had bought from the government) for bankrolling the expansion of Tata Teleservices. Radia played a key role in convincing Mahajan that there was synergy amongst the two companies as Tata Teleservices’ international telephony would be handled by VSNL. Mahajan cleared the investment. So much did Tata come to trust her that she personally delivered his handwritten letter to DMK supremo M Karunanidhi in which he made a case for Raja’s reinstatement in 2009!


Pradeep Baijal, a former chairman of the Telecom Regulatory Authority of India and her partner in Noesis, introduced Radia to Mukesh Ambani, insiders say. Radia not only managed to get the Reliance Industries account but also set up a new company (Nucom) for it; she put together a 40-member team in no time and in three weeks prepared a clear strategy on how to handle the battle with Anil Ambani over gas from the Reliance Industries fields in the Krishna-Godavari basin.
***
It isn’t that Radia succeeded in all her businesses and mandates. Despite her best efforts, she couldn’t convince Mamata Banerjee to alter her stand on Singur, nor was she able to get Tata to meet the enigmatic leader. Rivals say she depended too much on the Left government to push the deal through. Her friends say Singur was a success because public sympathy eventually turned in favour of Tata. Noesis too wasn’t a grand success. While she hired retired bureaucrats, they did not get any business and depended on Vaishnavi for fresh mandates. She also flirted with advertising. And her attempt to get into financial public relations, in collaboration with global agency Financial Dynamics, didn’t really take off.


Radia’s biggest failure was to give wings to her dreams of owning an airline, thanks to fierce opposition within the government as well as from existing airlines. Radia promoted Magic Air which was to be a low-cost carrier but the government (Praful Patel was the aviation minister) stopped her because foreign investment was not allowed in the sector. She also made an attempt to buy Sahara Airlines with a consortium of investors but found the price tag forbidding. “I think there was always this fear from other airlines that she would rope in the Tata group and get in big money. And her rivals would not like that to happen,” says an aviation insider.


What next? Will she go back to London as many of her detractors believe? Those who know her say she will continue to work as a consultant and will stay on in India. She wants to help companies keen to enter emerging markets, especially in Africa where she was born. The education and healthcare spaces also interest her; she might be an investor or push it personally. She also hopes to support the businesses in which her three sons would like to go. Would she have just closed down if the tape controversy did not happen? Most probably no, say those who know her well. They also say she would not have tied herself to her biggest account — the Tata group — anymore.

Banking...4 Q

Source :Prashant Joshi :BS :November 18, 2011, 0:25 IST


1.    My uncle and aunt had taken a joint home loan and have been servicing it for 15 years. But, they passed away recently. There is nobody who can service the loan. I am interested in their property and am willing to service it. Is this possible? If yes, what is the procedure?


You will have to get in touch with the bank to find the options available. In such cases, banks generally proceed on the basis of a legally valid will/succession certificate or look to the legal heir. If you are their successor, approach the bank (with other successors, if any) and express willingness to service the loan. Your ability to take it over would be determined by the bank, based on your financial capability and credit history


2.   While shopping for a home loan 10 days before, a leading private sector bank said it would charge two per cent above the base rate. When I went back to apply, it said I would have to pay 2.5 per cent over the base rate, without explaining. 
What could be the probable reason?


Interest rates offered by banks depend on the prevailing cost of funds (interest rates) and the promotional campaigns from time to time, which have a certain validity period. The change in cost of funds or expiry of a particular promotion may be the reason for increase in the rates quoted to you. However, do note that the actual rate applicable may vary, based on the loan size, legal and title checks of your property and financial and credit history checks.


3.  Does Cibil also take into account repayment of personal and education loans when keeping a record of one’s credit history?


The repayment track record for any credit facility, be it a credit card, home, personal or education loan, etc., is reported to Cibil or other credit bureaus by the participating banks.


4.    I know a bank account holder gets insurance of Rs 1 lakh for the money in the account. Can one take additional insurance for this?


All commercial banks, including branches of foreign banks functioning in India, local area and regional rural banks are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). DICGC covers each depositor up to a maximum of Rs 1 lakh held by him in the same right and capacity. Under this arrangement, no additional insurance cover is available.


The writer is managing director & head, private & business clients (India), Deutsche Bank. The views expressed are his own.
 
   

Reserve Bank kills India growth story

source :M D Nalapat: Pakistan observer::Friday, November 18, 2011


In 1997, then Prime Minister of China Zhu Rongji took note of the crisis in several Asian economies and launched a full scope reform of State-Owned Enterprises (SOEs) in China. Several of the worst performers were shut down, and others merged together or told to confine themselves to their core competences. Zhu’s slogan was “Grasp the big and ignore the small”. As a consequence, several smaller state enterprises were shut down. However, industrial reforms ensured that the slack caused by this was more than made up by private units, which were given much greater freedom than previously. Certainly the 1997-99 SOE reform was a very painful process, and it is estimated that about 40 million lost their livelihoods directly or indirectly as a consequence of the measures adopted by Zhu. However, several of these got new jobs in the next few years, as the Chinese industrial economy, both public and private, began to expand throughout the first decade of the 21st century. Today, several SOEs in China have emerged as some of the largest companies in the world.


The growth of Chinese companies has become a nightmare for companies in Europe, who are unable to compete on terms of price. Several markets that at one time were the exclusive preserve of European companies have now switched to Chinese imports. Even more troubling, during 2003-5,several Indian companies began to emerge as global competitors. Indeed, they were even able to buy out several companies in Europe, including huge enterprises such as Arcelor Steel, Jaguar-Land Rover and Corus. All of a sudden, there was fear in company boardrooms across Europe at this new competitor from Asia. Would even more of their global markets get lost because of the Indian private sector?. It was exactly at this time of gathering trouble for European businesses that the RBI, the Reserve Bank of India (the central bank of the country), began to put in place policies that were certain to


negatively affect the Indian growth story. Then RBI Governor Yaga Reddy began raising bank interest rates on loans drastically, besides other steps designed to sharply reduce loans to industry and commerce. From the close of 2005 onwards, Reddy was determined to starve the private sector in India of money from commercial banks, and to see that they paid very high interest rates on the loans taken by them. In the process, he reversed the policy of low interest rates that had helped ensure a high growth rate (and moderate inflation) during the previous five years. Although the RBI is supposed to be an independent organisation, yet the government takes care to appoint only career civil servants as Governors, thereby ensuring that they will follow the habit of a lifetime and listen to commands (passed off as “informal requests”) from the Union Finance Ministry.


Despite increasing protests from industrial groups in India, who began losing out in international markets because of the high bank interest rates and the drying up of credit, the RBI continued its suicidal policy. Clearly, the approach of the central bank met with approval from the Chairperson of the United Progressive Alliance government, Sonia Gandhi, despite the fact that it gave an unfair advantage to European (and Chinese) companies competing in the Indian market. It is noteworthy that Sonia Gandhi is very popular in both China and the EU, being the subject of frequent and flattering media reports in both locations. While Manmohan Singh is the Prime Minister, the reality is that the ministers in his team report to Sonia Gandhi. In a way, he can be compared to President Ahmedinejad of Iran, whose ministers report to Supreme Leader Ali Khamenei rather than to him. Being an expert economist, Manmohan Singh understood the harm that the policy of restrictive credit and high interest rates was doing to the Indian economy, yet he was forced to remain a silent bystander while Finance Minister P Chidambaram ( who is much closer to Sonia Gandhi and her family than is Manmohan Singh) orchestrated the RBI policies which began to apply the brakes on economic growth in India.


Naturally, Yaga Reddy became a hero in Europe, including in the UK, because of the benefits that his policy was showering on industry in that continent. By the time he retired in 2008, the once-feared Indian private sector had diminished into a shadow of is previous self, wounded by the policies of its own government. The Finance Ministry and the RBI were fully aware that rising inflation (which they gave as the reason for higher and higher interest rates) was not at all lowered by higher interest rates. Instead, the higher rates fuelled more inflation, by adding to the costs of doing business. This increase was passed on to the consumer, thereby raising prices still more. The increase was promptly used by the RBI to justify still higher interest rates and sharper cutbacks in bank lending, a cycle of disaster that began picking up steam just when the international financial crisis hit in 2008.


Although the RBI has claimed credit for the relatively better health of Indian banks as compared to those in the US or the EU, the reality is that the lack of problems with Home Lending by Indian banks is because there is a sizeable “black money”( ie undeclared) component in the value shown of houses that are mortgaged to the banks for a loan. This underestimation of the money value of houses in India provides a cushion for the banks in case of a fall in house prices, a factor that is not present in economies where 100% of the value of a dwelling is declared to a bank. That India weathered the 2008 crisis better than several other major economies is a tribute to the resilience of the Indian people and to its entrepreneurial community, not to the policies of a government that has been working overtime since 2005 to slow the indian economy down.


In order to ensure the continuation of Finance Ministry control over the RBI, another career civil servant was made Goverrnor of the RBI in 2008,after Reddy finally retired. Duvvuri Subbarao was a former Finance Secretary, used to taking orders from the Union Finance Minister. He has continued, with still greater viciousness, the policy of higher and higher interest rates and reduction in the flow of credit. To the delight of those VVIPs who want to ensure that Europe and China do not need to feel the pain of competition from India, Subbarao has increased interest rates by as much as thirteen times so far, all in the name of fighting inflation. He has ignored the fact that prices have risen, not fallen, each time he has raised interest rates. After all, he has to fulfill the wishes of those who seek to derail the India growth story. He has to obey those who want to see that Indian industry never emerges as a serios competitor to European and Chinese companies, a job he is carrying out so well that his term in office has been extended from 2011 to 2013.By that time, Reserve Bank of India Governor Subbarao would have succeeded in finishing off several thousand enterprises in India, which are being closed down each week because of the unbearable burden of high interest rates.


The India that was roaring upwards in 2003-2005 is now going downhill, writhing in agony. The Indian growth story has been replaced by steep falls in Manufacturing and even in Services. The only thing growing exponentially is government expenditure. The RBI is merrily printing currency notes to finance the wasteful expenditure of a government that spends more in a single year than others ever did in five. Another “achievement” of Subbarao has been the steady fall in the value of the Indian riupee, which has gone down by 20% in just a year, another factor causing higher rates of inflation. Of course, Subbarao’s political masters do not bother about the falling rupee, because he knows that VVIPs are happy that their Swiss bank deposits get more in rupee terms each time the currency in India gets reduced in value. If the fence begins to eat the crops, what hope is left? When the RBI itself becomes an engine of economic stagnation, India’s once-bright future seems to be darkening.


—The writer is Vice-Chair, Manipal Advanced Research Group, UNESCO Peace Chair & Professor of Geopolitics, Manipal University, Haryana State, India.

As defaults mount, power firms warn of blackouts

Source :Live Mint:Utpal Bhaskar,: Fri, Nov 18 2011. 1:00 AM 

In what may lead to blackouts across the country, the power distribution companies of Tamil Nadu, Jharkhand, Assam, Punjab, Madhya Pradesh and Delhi, among others, are defaulting on payments to public sector electricity utilities.


These utilities are now threatening to pull the plug. Under the existing rules, they are allowed to “regulate” or discontinue power supply if dues haven’t been paid for 60 days.


A senior executive at a central government-owned utility, requesting anonymity, warned that the situation could spiral out of control if “not defused soon”.


Money due to state-run utilities after 60 days of bill submission amounts to Rs.5,347.78 crore as of 24 October, according to government data. The public sector units (PSUs) include Power Grid Corp. of India Ltd, NHPC Ltd, Damodar Valley Corp., Tehri Hydroelectric Development Corp., SJVN Ltd, Neyveli Lignite Corp. Ltd, Tenughat Vidyut Nigam Ltd, North Eastern Electric Power Corp. Ltd, Indraprastha Power Generation Co. Ltd and Nuclear Power Corp. of India Ltd.


Of this amount, Reliance Group’s BSES Rajdhani Power Ltd and BSES Yamuna Power Ltd alone account for Rs.1,158.32 crore.


Other distribution firms that owe money are those of Bihar, Meghalaya, Jammu and Kashmir, Arunachal Pradesh, Manipur, Jaipur Vidyut Vitran Nigam Ltd and West Bengal.


“We’re putting pressure and giving notices on regulation of power. The situation is not comfortable. This development is recent and has happened in the last few months,” said A.B.L. Srivastava, chairman and managing director of NHPC.


“The distribution companies are not paying and (this) is compounding matters for us since we’re a small company,” said R.S.T. Sai, chairman and managing director, Tehri Hydro. “We are having difficulties as our main customers Delhi, Jaipur Vidyut Vitran Nigam Ltd and Uttar Pradesh are not paying. We are trying to persuade them and will resort to giving notice shortly.”


This comes as distribution firms across India, most of which are owned by the states, are finding it difficult to raise working capital and owe a staggering Rs.1.77 trillion to banks, an indicator of the crisis unfolding in the Indian power sector.


“The discoms (distribution companies) will have to increase their financial viability. The Centre and states have to come up with a solution. The situation has turned critical. We have started sending notices. While things are yet to turn catastrophic, if it goes on for long it will be a disaster,” said R.N. Nayak, chairman and managing director, Power Grid.


Another senior Power Grid executive, requesting anonymity, said: “The state discoms are not paying and dues have started piling up. While a generation utility has the option of diverting power, all the transmission lines are not dedicated to one state and cater to multiple states, putting us at a disadvantage. We have given notices to the states to stop power supply.”


Many distribution utilities are saddled with losses arising from theft, inefficient transmission and billing inefficiencies. Some regularly buy expensive power to tide over short-term deficits, and many haven’t revised rates in years.


The poor financial health of these distribution firms means they cannot raise money at all, or can do so only at very high interest rates. Worse, since they are the main customers of power generation and transmission companies, there is a growing reluctance among both investors and financiers to invest in the latter.


“The discoms will have to pay. Their financial obligations will have to be met,” said India’s power secretary P. Uma Shankar.


India has 73 distribution utilities, including a handful of private ones in states such as Delhi that have privatized electricity distribution.


BSES Delhi has received regulation notices from several entities, a spokesperson said in an email.


“The situation has arisen entirely because of substantial increases in power purchase costs these last few years coupled with the complete absence of a cost-reflective tariff regime at the distribution level,” the company said.


A central bank warning to banks on loans to the sector has made raising debt difficult, it said. The situation is expected to improve to some extent following new tariffs, but Delhi discoms continue to “incur an average cash loss of over Rs.1.60 for every unit of power supplied”, the company said.


“Under the circumstances, we are making every effort to convince the generating and transmission companies that being equal partners in supplying power to Delhi, they should not resort to regulation of power to BSES Delhi, as this has a direct impact on power availability in Delhi, the national capital,” BSES said.


State-owned NTPC Ltd had earlier issued notices to the two Reliance Group companies stating it would discontinue power supply last month if Rs.895 crore in dues weren’t paid. However, the issue was resolved after the two power distributors gave a written assurance to NTPC that they would unconditionally restore the letters of credit, clear outstanding dues and also undertake to pay arrears in six equal instalments before March 2012, as reported by Mint on 6 September.


The cumulative losses of the distribution utilities are around Rs.75,000 crore, and if the present trend continues, their projected losses in 2014-15 will be Rs.1.16 trillion, according to a study conducted by energy consultingcompany Mercados EMI Asia for the 13th Finance Commission.

Home Loans : Bank’s list of approved projects is helpful but you can’t trust it completely

Source :Live Mint : Devesh Chandra Srivastava:Thu, Nov 17 2011. 9:27 PM IST


All you need to do is visit your bank’s branch and ask for the list of approved projects


Recently, the largest private sector bank in India, ICICI Bank Ltd, came up with a special offer for prospective homebuyers seeking a loan from the bank.


 However, the bank put a condition that only those customers who chose a property from the bank’s database of approved projects would get the special offer.


 Like ICICI Bank, most banks maintain a list of projects they approve of.


What is the list’s significance?




Properties figuring in banks’ lists are considered trustworthy since banks do their due diligence before including one. Usually, banks approve projects that are saleable in terms of their demand in the market. Banks also look at the developer’s capacity to complete the project.
It is usually easier to get a loan for a property in one of these projects. In fact, prospective buyers can check whether a property they like is in a bank’s approved list.


How can you get the list?


All you need to do is visit your bank’s branch and ask for the list of approved projects. The bank executive will ask for your preferred location and budget. Accordingly, he will shortlist four-five names for you.


Should you trust the list?


If a particular project is in a bank’s list, it indicates the project is relatively safer to invest. But you cannot trust the list completely as banks cannot take the guarantee in case of a title dispute or delay in possession. For example, in the recent land acquisition controversy in Noida Extension, most banks were financing homebuyers without any prior knowledge of the problems over land title and clearances. Later, when the case went to the court, banks stopped lending to homebuyers. Till date, homebuyers in Noida Extension are waiting to get a loan.


What should you do?


As the bank’s approval on a project is not the final word on the authenticity of the title and clearances, you should independently verify the details of the project. While the project is under construction, ask property dealers and consultants operating in that area for more information on the project. Other details can be sought from the local development authority by filing an application under the Right to Information Act to know if the developer has a licence number to build a particular project, whether he has the title of the land and if the local authority has approved the plans of the project.

IDBI Bank becomes first lender to tap China funds

Source :16 NOV, 2011, 04.47PM IST, REUTERS 



MUMBAI/HONG KONG: India's IDBI Bank became the first lender to raise funds in offshore yuan in Hong Kong, signalling a new set of borrowers to enter the growing bond market. 


From its sleepy origins as a tiny market for Chinese and Hong Kong companies in 2009, the so-called "dim sum" market or bonds sold by issuers in Hong Kong is known, has exploded to include multinational firms, large Chinese state-run enterprises and even casino companies. 


While the steady increase in rupee interest rates has driven local companies to raise funds overseas, the yuan's attractiveness has received a boost after New Delhi added the Chinese currency as a external financing vehicle to the US dollar, Japanese yen, euro and the pound sterling in September . 


India has set a $1 billion limit for borrowing in yuan within the $30 billion overseas borrowing limit for companies. The bond sold by the mid-sized Indian lender was eventually sold at a lower-than-projected yield of 4.5 percent, indicating demand from investors for yuan-linked assets remained intact despite a September selloff in Asian rates and FX. 


The three-year deal was eventually priced at 4.5 percent, below an initial projection of 4.625 percent. The issue size was expanded to 650 million yuan ($101 million) from an expected 500 million yuan. The orderbook closed at around 900 million yuan with more than 20 accounts involved. 


"IDBI Bank decided to access this market as an attractive funding cum diversification play as also to cultivate a new and fast developing investor class," Melwyn Rego, executive director at the bank told a media briefing. IDBI has a "Baa3" rating from Moody's and "BBB-" from S&P, both with stable outlooks, and similar ratings are expected for the new bonds. 


The bank has already lined up assets, which will be funded from the proceeds of the bond said, Rego said. While the bank did not have any immediate plans to tap the market again, despite the good demand from investors, Rego said the bank has applied to Chinese banking authorities to open a representative office in Shanghai. 


Many foreign corporate borrowers, including the World Bank, Volkswagen, McDonald's Corp and Caterpillar , have tapped the CNH market for funds for their Chinese operations, rather than borrowing in the dollar markets and converting into Chinese currency, which can be costlier. 


Growth in the offshore renminbi, or yuan, bond market has been driven by a near-consensus market view that the yuan will rise, which has enabled top-rated issuers to pay less than 1 percent interest on their offerings. This year, dim sum bonds worth 140 billion yuan have been issued, compared with 40 billion yuan worth bonds sold during 2010. 

Exim Bank's capital to increase five-fold to Rs 10,000 cr

Source :16 NOV, 2011, 05.22PM IST, PTI 

NEW DELHI: The Cabinet on Wednesday approved draft amendments to a law governing the Exim Bank, proposing an increase in its authorised capital from Rs 2,000 crore to Rs 10,000 crore. 

Besides, the Export Import Bank of India(Amendment) Bill, 2011 proposes appointment of two whole-time directors, other than the Chairman and Managing Director. The government will take the amendment bill to Parliament in the near future. 

The Exim Bank, which plays a vital role in financing of export and import deals, is governed under the Export-Import Bank Act, 1981. 

"Increase in the authorised capital would enable the bank to take higher export credit exposures and enable it to borrow funds to disburse under export line of credits," an official statement said after the Cabinet meeting. 

The bill also seeks to empower the Central government to further increase the authorised capital of the Exim Bank without any more legislative changes. 

By appointing two whole time directors, the management structure of the bank would be strengthened, it said. 

Exim Bank was set up as a corporation in 1982 under the Export Import Bank of India Act, 1981 for providing financial assistance to exporters and importers. 

It also functions as the principal financial institution for coordinating the working of different institutions in export financing and import of goods and services. 

During 2010-11, 22 Letters of Credit (LoC) aggregating USD 2.38 billion were given by the Exim Bank to support export of projects, goods and services from India. 

As on March, 2011, the Bank has a credit commitment of USD 6.66 billion covering 72 countries in Africa, Asia, CIS, Europe and Latin America.