Text of UFBU/2008/Circular No. 28 dt.25-12-2008
Meeting of UFBU held on 19-12-2008:
A meeting of the UFBU was held on 19-12-2008. Com L Balasubramanian (NCBE) presided over the meeting. The meeting took note of the discussions held with IBA on 15.12.2008 and welcomed the broad understandings reached on the issue of compassionate appointments/financial compensation scheme. It was decided that the finalization of the scheme and approval of the same by the Government should be expedited in as much as the unilateral scheme of the IBA/Government implemented from July, 2004 has not benefited the families of the deceased employees and hence the revised scheme to be extended in all such past cases also.
The meeting also decided that the formula and method of sharing the additional pension cost on account of another option to the PF optees should be resolved by discussions with the IBA as early as possible. Looking to the emerging scenario, the meeting underscored the need to quicken the exercise of wage revision settlement.
The meeting also decided to take up the following issues with the IBA/RBI/Government.
1. Increase in staff housing loan limits.
2. Amendment to revise the existing ceiling of Rs. 3.50 lacs under Gratuity Act.
3. Withdrawal of unilateral instructions of RBI on penalty on staff for fake notes.
4. Exemption to Private Banks to have their own Bank-level Staff Pension Fund like the Public Sector Banks.
MEETING WITH IBA ON 24-12-2008:
Further to the last round of discussions held with IBA on 15-12-2008, a round of Small Committee-level discussions took place on 24-12-2008 in Mumbai. In this meeting tentative calculations on the possible impact of wage revision demands, index point for merger of DA, etc were exchanged besides the ways and means to work out the manner and possibilities for funding the additional pension cost, etc. The IBA informed us that as per the details received by them, there are 64,250 past retirees (PF optees) between the date of Pension Regulations in 1996 and 31-3-2008 and that the Banks’ PF contributions paid to them amount to Rs. 1,718 crores. To work out the cost of pension option to these retirees, these details have been referred to the panel of common Actuaries and would be taken up for discussions on receipt of the same.
It was decided to continue the discussions in the first week of January, 2009 along with a meeting of the Negotiation Committee.
Further developments will be informed to units in due course.
With greetings,
Yours comradely,
Sd..
C.H. VENKATACHALAM
CONVENER
Friday, December 26, 2008
Monday, December 15, 2008
AIBEA CIRCULAR -
Dear Comrades,
Negotiations With IBA
We reproduce herewith the text of UFBU circular of date on the details of the discussions held between IBA and UFBU today, and our current demands viz. Compassionate Appointments, Pension Option and Wage revision.
With Greetings,
Yours Comradely,
(C. H. VENKATACHALAM)
GENERAL SECRETARY
Dear Comrades,
Discussion with IBA
Another round of talks took place today in Mumbai, between UFBU and IBA on our current demands.
UFBU Meeting: Prior to discussions with IBA, a meeting of UFBU was held which was presided over by Com. V. Eswaran (AIBOC). After discussions, the meeting finalised its broad approach towards the issues to be taken up with IBA. The meeting felt that all the issues viz. Compassionate Appointments Scheme, Pension Option and Wage Revision have to be expedited.
Meeting with IBA: In the afternoon, discussions with IBA took place. The IBA team was led by Mr. M. V. Nair, Chairman of Negotiating Committee, while UFBU was represented by the leaders of the constituent unions.
a) Compassionate Appointment Scheme: Further to the last meeting, improvements to be made in the compassionate appointments scheme to be finalised for recommendation to the government was discussed in today’s meeting. Our suggestions on improvements in eligibility for compassionate appointments / financial compensation, formula for working out the financial compensation, etc were broadly finalised. After fully finalizing the scheme, the same would be sent to the Government for their approval. We have suggested that the scheme should be extended to past cases from July 2004. Further developments will be informed to units in due course.
b) Pension Option: We had earlier informed our units that as per the report of common actuaries, the net shortfall in the pension fund comes to around 6,000 crores, for extending another option to the PF Optees. Today it was informed that the number of past retirees (PF Optees) comes to around 60, 000 and the additional liabilities in their case is also to be worked out as we have demanded that all the past retirees should also be covered by another option to pension.
In order to work out the methodology of sharing the additional cost, etc, a Small Committee will be meeting in the next week whereafter the matter will be taken up in the Negotiating Committee discussions.
c) Wage Revision: From UFBU, we brought to the attention of the IBA about the growing anxiety on the part of the employees and officers over the delay in finalizing the wage revision settlement. We suggested that the whole issue should be expedited and settled within the next 2 months. The IBA, while reiterating that the settlement would be effective from 1/11 /2007, desired that the details and implications of our demands be worked out at the small committee level before they react on our demands. IBA also expressed their desire to resolve the issue in the next 2 / 3 months.
d) UFBU Meeting: To discuss and workout our further approach to the issues for discussions with the IBA in the small committee, it has been decided to hold an UFBU meeting at Chennai on 19 / 12 / 2008.
It has been decided that the next round of meeting with the negotiating committee will be held in the first week of January – 2009 to be preceded by the small committee discussions.
With Greetings,
Yours comradely,
C.H. VENKATACHALAM
CONVENER
Negotiations With IBA
We reproduce herewith the text of UFBU circular of date on the details of the discussions held between IBA and UFBU today, and our current demands viz. Compassionate Appointments, Pension Option and Wage revision.
With Greetings,
Yours Comradely,
(C. H. VENKATACHALAM)
GENERAL SECRETARY
Dear Comrades,
Discussion with IBA
Another round of talks took place today in Mumbai, between UFBU and IBA on our current demands.
UFBU Meeting: Prior to discussions with IBA, a meeting of UFBU was held which was presided over by Com. V. Eswaran (AIBOC). After discussions, the meeting finalised its broad approach towards the issues to be taken up with IBA. The meeting felt that all the issues viz. Compassionate Appointments Scheme, Pension Option and Wage Revision have to be expedited.
Meeting with IBA: In the afternoon, discussions with IBA took place. The IBA team was led by Mr. M. V. Nair, Chairman of Negotiating Committee, while UFBU was represented by the leaders of the constituent unions.
a) Compassionate Appointment Scheme: Further to the last meeting, improvements to be made in the compassionate appointments scheme to be finalised for recommendation to the government was discussed in today’s meeting. Our suggestions on improvements in eligibility for compassionate appointments / financial compensation, formula for working out the financial compensation, etc were broadly finalised. After fully finalizing the scheme, the same would be sent to the Government for their approval. We have suggested that the scheme should be extended to past cases from July 2004. Further developments will be informed to units in due course.
b) Pension Option: We had earlier informed our units that as per the report of common actuaries, the net shortfall in the pension fund comes to around 6,000 crores, for extending another option to the PF Optees. Today it was informed that the number of past retirees (PF Optees) comes to around 60, 000 and the additional liabilities in their case is also to be worked out as we have demanded that all the past retirees should also be covered by another option to pension.
In order to work out the methodology of sharing the additional cost, etc, a Small Committee will be meeting in the next week whereafter the matter will be taken up in the Negotiating Committee discussions.
c) Wage Revision: From UFBU, we brought to the attention of the IBA about the growing anxiety on the part of the employees and officers over the delay in finalizing the wage revision settlement. We suggested that the whole issue should be expedited and settled within the next 2 months. The IBA, while reiterating that the settlement would be effective from 1/11 /2007, desired that the details and implications of our demands be worked out at the small committee level before they react on our demands. IBA also expressed their desire to resolve the issue in the next 2 / 3 months.
d) UFBU Meeting: To discuss and workout our further approach to the issues for discussions with the IBA in the small committee, it has been decided to hold an UFBU meeting at Chennai on 19 / 12 / 2008.
It has been decided that the next round of meeting with the negotiating committee will be held in the first week of January – 2009 to be preceded by the small committee discussions.
With Greetings,
Yours comradely,
C.H. VENKATACHALAM
CONVENER
UFBU CIRCULAR - DISCUSSIONS WITH IBA
Discussion with IBA
Another round of talks took place today in Mumbai, between UFBU and IBA on our current demands.
UFBU Meeting: Prior to discussions with IBA, a meeting of UFBU was held which was presided over by Com. V. Eswaran (AIBOC). After discussions, the meeting finalised its broad approach towards the issues to be taken up with IBA. The meeting felt that all the issues viz. Compassionate Appointments Scheme, Pension Option and Wage Revision have to be expedited.
Meeting with IBA: In the afternoon, discussions with IBA took place. The IBA team was led by Mr. M. V. Nair, Chairman of Negotiating Committee, while UFBU was represented by the leaders of the constituent unions.
a) Compassionate Appointment Scheme: Further to the last meeting, improvements to be made in the compassionate appointments scheme to be finalised for recommendation to the government was discussed in today’s meeting. Our suggestions on improvements in eligibility for compassionate appointments / financial compensation, formula for working out the financial compensation, etc were broadly finalised. After fully finalizing the scheme, the same would be sent to the Government for their approval. We have suggested that the scheme should be extended to past cases from July 2004. Further developments will be informed to units in due course.
b) Pension Option: We had earlier informed our units that as per the report of common actuaries, the net shortfall in the pension fund comes to around Rs. 6,000 crores, for extending another option to the PF Optees. Today it was informed that the number of past retirees (PF Optees) comes to around 60, 000 and the additional liabilities in their case is also to be worked out as we have demanded that all the past retirees should also be covered by another option to pension.
In order to work out the methodology of sharing the additional cost, etc, a Small Committee will be meeting in the next week whereafter the matter will be taken up in the Negotiating Committee discussions.
c) Wage Revision: From UFBU, we brought to the attention of the IBA about the growing anxiety on the part of the employees and officers over the delay in finalizing the wage revision settlement. We suggested that the whole issue should be expedited and settled within the next 2 months. The IBA, while reiterating that the settlement would be effective from 1/11 /2007, desired that the details and implications of our demands be worked out at the small committee level before they react on our demands. IBA also expressed their desire to resolve the issue in the next 2 / 3 months.
d) UFBU Meeting: To discuss and workout our further approach to the issues for discussions with the IBA in the small committee, it has been decided to hold an UFBU meeting at Chennai on 19 / 12 / 2008.
It has been decided that the next round of meeting with the negotiating committee will be held in the first week of January – 2009 to be preceded by the small committee discussions.
With Greetings,
Yours comradely,
C.H. VENKATACHALAM
CONVENER
Another round of talks took place today in Mumbai, between UFBU and IBA on our current demands.
UFBU Meeting: Prior to discussions with IBA, a meeting of UFBU was held which was presided over by Com. V. Eswaran (AIBOC). After discussions, the meeting finalised its broad approach towards the issues to be taken up with IBA. The meeting felt that all the issues viz. Compassionate Appointments Scheme, Pension Option and Wage Revision have to be expedited.
Meeting with IBA: In the afternoon, discussions with IBA took place. The IBA team was led by Mr. M. V. Nair, Chairman of Negotiating Committee, while UFBU was represented by the leaders of the constituent unions.
a) Compassionate Appointment Scheme: Further to the last meeting, improvements to be made in the compassionate appointments scheme to be finalised for recommendation to the government was discussed in today’s meeting. Our suggestions on improvements in eligibility for compassionate appointments / financial compensation, formula for working out the financial compensation, etc were broadly finalised. After fully finalizing the scheme, the same would be sent to the Government for their approval. We have suggested that the scheme should be extended to past cases from July 2004. Further developments will be informed to units in due course.
b) Pension Option: We had earlier informed our units that as per the report of common actuaries, the net shortfall in the pension fund comes to around Rs. 6,000 crores, for extending another option to the PF Optees. Today it was informed that the number of past retirees (PF Optees) comes to around 60, 000 and the additional liabilities in their case is also to be worked out as we have demanded that all the past retirees should also be covered by another option to pension.
In order to work out the methodology of sharing the additional cost, etc, a Small Committee will be meeting in the next week whereafter the matter will be taken up in the Negotiating Committee discussions.
c) Wage Revision: From UFBU, we brought to the attention of the IBA about the growing anxiety on the part of the employees and officers over the delay in finalizing the wage revision settlement. We suggested that the whole issue should be expedited and settled within the next 2 months. The IBA, while reiterating that the settlement would be effective from 1/11 /2007, desired that the details and implications of our demands be worked out at the small committee level before they react on our demands. IBA also expressed their desire to resolve the issue in the next 2 / 3 months.
d) UFBU Meeting: To discuss and workout our further approach to the issues for discussions with the IBA in the small committee, it has been decided to hold an UFBU meeting at Chennai on 19 / 12 / 2008.
It has been decided that the next round of meeting with the negotiating committee will be held in the first week of January – 2009 to be preceded by the small committee discussions.
With Greetings,
Yours comradely,
C.H. VENKATACHALAM
CONVENER
BANKING NEWS - AIBEA - 14 & 15.12.2008
Nearly 1 billion of world’s people face chronic hunger
By Oliver Richards 13 December 2008
The number of undernourished people in the world has increased from 923 million in 2007 to 963 million in 2008. This disturbing figure comes from a report on world hunger released on December 9 by the Rome-based UN Agency, the Food and Agriculture Organization (FAO), entitled The State of Food Insecurity in the World 2008.
The report notes that the number of chronically hungry people rose by 75 million in 2007, while the 2008 figure shows an increase of 40 million. The recent increase in the number of hungry people has been exacerbated by high food prices, especially in developing countries.
In a news release on the FAO web site, FAO Assistant Director-General Hafez Ghanem underscored the difficulties being faced by people in the developing world:
"For millions of people in developing countries, eating the minimum amount of food every day to live an active and healthy life is a distant dream. The structural problems of hunger, like the lack of access to land, credit and employment, combined with high food prices remain a dire reality."
The report is the ninth in a series that began in 1996 at the World Food Summit (WFS), which set up the goal of halving world hunger by 2015. While the WFS called for the number of hungry people to decline by 50 percent, the UN's Millennium Development Goal (MGD) has set a target to cut in half the proportion of those suffering malnutrition.
Given the upsurge in food prices and other problems, it will continue to be difficult to achieve either goal by 2015. With the increase to 963 million hungry people, it would be necessary to reduce the number of hungry people by about 480 million. And, while the proportion of undernourished people (the MDG measurement) had been decreasing, from 20 percent in 1990-92 to 16 percent in 2003-05, it appears that this progress is being reversed, moving back up to about 17 percent.
The distribution of undernourished people in the world is largely concentrated in the developing world, although there were 16 million undernourished persons in developed countries in 2003-2005. Among the 832 million chronically hungry persons in 2003-2005, 65 percent were concentrated in India, China, the Democratic Republic of the Congo, Bangladesh, Indonesia, Pakistan, and Ethiopia.
In sub-Saharan Africa, while the proportion of people who are chronically hungry was reduced between the early 1990s and 2003-2005, one in three persons still remains undernourished. However, most of the numerical increase in the undernourished has come from the Democratic Republic of Congo, which has suffered from a persistent conflict resulting in an increase from 11 million to 43 million chronically hungry people.
While South America has been one of the most successful sub-regions in reducing hunger, this success has not been uniform throughout the Latin American and Caribbean region. In Haiti, for example, 58 percent of the population suffers from chronic hunger.
The US invasions of Afghanistan and Iraq have had a direct, negative impact on levels of undernourishment in the Near East and North Africa regions, which have generally experienced some of the lowest levels of undernourishment. The number of chronically hungry undernourished persons in the region nearly doubled, from 15 million in 1990-92 to 28 million in 2003-2005. This number has increased by 4.9 million in Afghanistan, and by 4.1 million in Iraq.
While there has been some modest progress in Asia and the Pacific regions, "nearly two-thirds of the world's hungry people still live in Asia," according to the FAO report.
Since 1992, barely a third of the developing countries have been able to reduce the number of those suffering from chronic hunger. The findings show that those hardest hit by increases in food prices were the poor, the landless, and female-headed households.
Low-income families are more likely to be "net food buyers," or households that consume a higher value of food staples than the value they produce, who stand to lose from an increase in the price of food staples.
While landowners are in a good position to gain from food price increases, the report notes, "Across the board, high food prices hit landless households hardest."
Female-headed households will also suffer proportionally more than male-headed households. This is due to female-headed households' tendency to spend a higher proportion of income on food, heightening the impact of food price increases, and the gender-specific obstacles that women face, which may restrict their access to certain resources such as land and credit.
Facing higher food prices, households may try to cope by changing the quality, quantity, and diversity of foods eaten, or make cuts in other areas such as health care and education. The first strategy results in malnutrition and higher risks of deficiencies in essential micronutrients, especially among women and children.
The story of Drissa Kone, living in Côte d'Ivoire, illustrates some of the problems that arise as individuals attempt to save money on medicine. Suffering from a severe respiratory infection, he has turned to counterfeit medicines, which sell for a fraction of the price of legitimate medicines but are of questionable quality and may even further harm his health.
The FAO has analyzed the key determinants of countries' vulnerability to high food prices: whether they are net importers of energy products and cereals, relative levels of poverty, and prevalence of undernourishment. The report discusses the diverse number of ways in which a food crisis can arise, resulting from both natural and man-made disasters.
Natural disasters can be classified by whether they are "slow onset" or "sudden onset." While slow onset disasters, such as droughts, have constituted the majority of natural disasters, sudden onset disasters, such as hurricanes or earthquakes, increased from 14 percent of all natural disasters in the 1980s to 27 percent in 2000.
According to the FAO, man-made disasters include both war or conflict and socio-economic shocks that may be internal or external. War has been the primary cause of man-made disasters, although disasters arising from socio-economic shocks have risen from 2 percent in the 1980s to 27 percent in 2000.
As the WSWS wrote in a three-part series, "The world food crisis and the capitalist market," the sources of the current food crisis "lie in economic and political processes of privatization and price speculation that have unfolded over the past three decades and are bound up with the globalization of capitalist agriculture."
The world is presently reeling from a gigantic "socio-economic shock," in the form of a developing global financial crisis, which will inevitably exacerbate the world hunger crisis, as millions of people find themselves jobless, homeless, and are thrust deeper into poverty.
That nearly 1 billion people are suffering from hunger is yet another testament to the irrational allocation of resources under capitalism. As the foreword to the report notes: "Hunger has increased as the world has grown richer and produced more food than ever in the last decade."
While the capitalist mode of production has revolutionized the productive forces, developing the capacity to feed every person on earth and eliminate hunger, the social relations of production have become a fetter upon the realization of this goal. The FAO's The State of Food Insecurity in the World 2008 documents the devastating impact of the growth of social inequality—in the form of chronic hunger—on large numbers of the world's population.
Inflation eases to 8 per cent
Business Line, NEW DELHI: PTI
Inflation rate fell further to 8 per cent for the week ended November 29 mainly on account of declining prices of fruits and vegetables. The wholesale price-based inflation fell by 0.4 per cent from 8.4 per cent in the previous week. The inf lation was 3.89 per cent during the corresponding period a year-ago.
In primary articles group, the prices of fruits, vegetables, barley and grams declined during the week. As far as manufactured items were concerned, unrefined oil, gur, and rapeseed and mustard oil became cheaper. The inflation rate has been declining after it touched a peak of 12.82 per cent in August.
Among other important items, the prices of cement too dropped marginally during the week, pulling down the index of Non-Metallic Mineral Products group by 0.1 per cent. The items that became expensive include safety matches, ragi, urad, bajra, maize, and groundnut seed and oil. Paper and paper products and plastic items like PVC fitting and accessories also became dearer. There was no movement in the index of Fuel, Power, Light and Lubricants during the week. However, the inflation data for the week ended November 29 does not capture the impact of the cut in prices of petrol and diesel by the government by Rs 5 and Rs 2 per litre, respectively.
Besides, it also does not reflect the price reductions following four per cent across-the-board cut in excise duty announced on Sunday as part of the stimulus package to boost economy. Once the impact of these decisions is reflected in the wholesale pri ces, the inflation rate could decline further. The inflation rate for the week ended October 4 was revised to 11.49 per cent from the provisional estimate of 11.44 per cent. -
RBI cautions banks over realty loans
Business Standard
Asks lenders to make sure that end use of advances to commercial real estate. The Reserve Bank of India (RBI) may have relaxed norms for lending to commercial real estate by banks, but prudence in lending still tops the central bank’s agenda.
RBI has asked banks to be cautious about the end use of funds lent to real estate companies to ensure that loans are for construction and not for refinancing the existing loans or paying back foreign shareholders or private equity shareholders who want to exit.
The central bank has told lenders to take caution as an informal guideline, even as risk weights have been brought down for exposure to real estate.
The risk weight is a method for classification of assets on the basis of weightage allocated in proportion to the riskiness of the loan portfolio. The higher the risk weight, the higher is the risk.
A few weeks ago, RBI brought down the risk weight on commercial real estate loans from 125 per cent to 0.4 per cent.
Banking sources said the boom in the real estate sector was primarily driven by foreign funds, mostly in the form of private equity, which had funded through direct equity or debt or a combination of convertible instruments.
“With a sharp downturn in the real estate sector, most of these equity-holders want to exit at this point of time, suffering a loss. This is because they are of the view that the situation might get worse. Therefore, RBI fears that the fresh loans given to real estate players should not get used for financing the debt or equity components of the finance by private equity players.
This is the reason why the banks are so reluctant to finance real estate companies even when liquidity is not a problem,” said a banker active in real estate lending. According to a merchant banker involved in structuring PE deals, most of the financing done by foreign funds or private equity parties carry a call option. The call option clause in the investment agreement provides the option to the PE to recall money if certain conditions are not met or if a situation turns adverse.
A director on the board of Vijaya Bank said there is concern over deteriorating credit profile of real estate firms and entities, including non-banking finance companies (NBFCs), which have funding exposure to them. Why should banks take extra exposure when chances of default may grow,” asked the Vijaya bank director.
“Given the sudden drop in demand in commercial real estate, some PE funds may not feel confident about the future of investments. Also, global parents of these funds have been hit hard by the financial crisis so they would like to retrieve money for investments,” a merchant banker added.
RBI chief calls for ‘significant’ policy action to tackle crisis
Business Line Kolkata, Dec. 11
Extends Rs 9,000-cr line of credit to National Housing Bank, Exim Bank.
The government and the Reserve Bank of India need to take “significant” steps to counter the “significant crisis”, Dr D. Subbarao, Governor, Reserve Bank of India, said here on Thursday.
“The crisis has evolved and is evolving. Nobody around the world has the exact picture of how big the crisis is. It is a significant crisis and we need to take significant policy actions,” he told reporters after RBI’s Central Board Meeting here on Thursday.
Talking about the way forward, he said, “The situation is uncertain and it is not possible for us to calibrate a precise roadmap but we will continue to take appropriate measures at the appropriate time,” he added. The Reserve Bank, Dr Subbarao said, would review the inflation forecast in the next monetary policy scheduled for January 27, 2009.
On rate cuts
On being asked about further rate cuts, the RBI Governor said, “We are constantly reviewing the situation, we have already adjusted our CRR and policy rates and we will take appropriate measures at the right time.” According to him, the monetary policy measures taken by the central bank have so far yielded positive results. Banks should take the cue from the rate cuts announced by the apex bank on Saturday and should revise their lending rates accordingly, he pointed out.
Dr Subbarao further said that RBI would closely monitor the developments in the global and domestic financial markets and would try to minimise the stress on various sectors of the economy on account of the international financial crisis and the global slowdown.
Credit, refinance
The apex bank on Thursday announced Lines of Credit worth Rs 9,000 crore to the National Housing Bank and Exim Bank. The bank’s Central Board on Thursday approved refinance facility of Rs 4,000 crore to NHB and Rs 5,000 crore to the Exim Bank under the prevailing repo rate (6.5 per cent) under Liquidity Adjustment Facility for a period of 90 days. “During the 90-day period, the amount can be flexibly drawn and repaid and at the end of the 90-day period, the drawal can also be rolled over. “This refinance facility will be available up to March 31, 2010,” the RBI Governor said.
Support for housing
This would help provide liquidity support to the housing sector, particularly to the housing finance companies, which have been adversely affected by the recent financial market developments, he said. The refinance facility to Exim Bank would help mitigate pressures on account of the recent developments on loan disbursements to Indian exporting companies, he said.
PSU banks set to offer cheaper, easy home loans
Business Line New Delhi, Dec 11
Package for small, medium sector also on cards.
New Package
Housing loans will be available at cheaper rates and under simpler terms - The modalities of the new package were being worked out
Home loan borrowers looking for finance of up to Rs 20 lakh are likely to see a slew of concessions coming their way in the next few days. State-owned banks are close to finalising a package to give a boost to the housing sector by making such loans available at cheaper rates and under simpler terms.
The move to provide relief for home loan borrowers comes in the wake of the Government’s recent fiscal stimulus booster in which it promised that public sector banks (PSBs) would shortly announce a package for two categories – up to Rs 5 lakh, and between Rs 5 lakh and Rs 20 lakh.
Borrowers are now expecting at least 200-300 basis point cut in interest rates as relief under the package. They want interest rates on fixed rate home loans to come down to between 7 and 9 per cent say for a 10-year term period.
“The package that we are discussing will not be confined to interest rates. If we are going to stop with interest reduction, it will not augur well for the package. There has to be other incentives,” Mr T.S. Narayanasami, Chairman, Indian Banks Association (IBA), told reporters after an IBA meeting here on Thursday.
The Finance Secretary, Mr Arun Ramanathan, and senior Finance Ministry officials were also present at the meeting.
The IBA Chairman said that bankers were still discussing the modalities on how the package should be structured and that they had not come to any definite conclusion. Besides interest rate reduction, the public sector banks were also looking to include concession on margin requirements, waiving of processing fee for loans and changes in pre-payment clause in the package, Mr Narayanasami said.
PSBs are also looking at making credit more accessible and cheaper for small and medium enterprises (SMEs). Indications are that some form of interest subvention would be provided.
However, for the proposed interest concession on home loans up to Rs 20 lakh, Mr Narayanasami made it clear that no interest subvention was contemplated or even necessary.
“The whole exercise is to make interest affordable for housing and SME sectors. There will be a pragmatic view in cutting interest. We have not decided to what extent we will cut the interest rate. You wait for the package to be announced in a day or two,” he said.
Meanwhile, sources in the banking industry said that at today’s meeting the issue of cost of funds for banks was discussed, especially from the context of bulk deposits. The Finance Ministry had issued instructions that there should be no acceptance of bulk deposits outside the card rates.
Central public sector enterprises (CPSEs) were also instructed to strictly adhere to Finance Ministry guidelines and desist from inviting bids from banks for parking their surplus funds. The practice of inviting bids were leading to competition among PSBs and thereby raising their cost of deposits, which in turn led to increased lending rates, according to the Finance Ministry.
The Government was now closely monitoring, through a committee, as to whether PSBs as well as CPSEs were complying with the directions or not, sources said.
Banks want subsidy to cut home loan rates
Business Standard
Public sector banks are likely to announce a 50 to 100 basis point cut in interest rates on home loans up to Rs 20 lakh. The government is also considering an interest subvention for loans below Rs 5 lakh.
Banking sources said banks may provide loans up to Rs 5 lakh at around 8.5 per cent,and those between Rs 5 lakh and 20 lakh will carry an interest rate of 9.25 per cent a year. At present, interest rates on home loans below Rs 20 lakh, with a tenure of up to 10 years, is 9.5 to 10.5 per cent.
“The comfort level for banks is 8.5 per cent for home loans up to Rs 5 lakh and 9.25 per cent for Rs 5 lakh-20 lakh,” a public sector bank chief, who attended a meeting in Delhi to discuss the package, said.
To facilitate banks to lend at these rates, sources said that RBI may relax risk weights for these categories of housing loans if the banks reduce the margin money from 25 per cent to 10 per cent. At present, the risk weight is 50 per cent for home loans up to Rs 20 lakh.
A reduction in the margin requirement, or the part of the loan paid by borrower upfront, will mean that banks will have to provide more funds to the extent of the increase in the actual loan amount. A relaxation in risk weights will reduce the cost of the loan for the banks.
Other incentives that were discussed included a waiver of processing charges for home borrowers and a five-year lock-in period on interest rates.
Apart from housing, the public sector banks are also likely to give 50-basis-point concession in lending rates to Small and Medium Enterprises (SMEs) hit by the economic downturn.
“We have not come to any definite conclusion (on home loans). Some package will be formalised in the next one or two days,” Indian Banks Association Chairman TS Narayanasami said after meeting Finance Secretary Arun Ramanathan.
PSBs may waive pre-payment penalty on home loans
Economic Times NEW DELHI:
Public sector banks (PSB) are considering a suggestion to waive pre-payment penalty for home loans up to Rs 20 lakh. At present, banks charge anywhere between 1% and 3% of outstanding loan amount as additional interest if a consumer wants to repay the loan amount before the initially agreed loan tenure.
“We are considering a proposal to either completely waive the pre-payment penalty or reduce it significantly,” said the chairman of a PSB, on condition of anonymity.
The Indian Banks’ Association (IBA) is examining a proposal in this regard and may come out with specific guidelines in a few days. IBA is also examining the possibility of bringing down or waiving the processing fee and lowering the requirement of margin money for small home loans. All these steps are part of a government plan to revive the moribund housing sector. A revival in this sector could have positive spin-offs across various industries, notably cement and steel. Banks may resort to doing away with pre-payment penalties in order to make more small home loans available to consumers at cheaper rates and relaxed norms. All these measures are in addition to rate cuts of up to 300 basis points being planned by PSBs, which will bring down interest rates on loans up to Rs 20 lakh to between 8 and 10%.
“We are examining the possibility of waiving the processing fee and bringing down the requirement of margin money,” IBA chairman TS Narayanasamy told reporters in New Delhi after meeting chiefs of other banks and senior finance ministry officials including finance secretary Arun Ramanathan.
Mr Narayanasamy, who is also the chairman of Bank of India (BoI), said that IBA would come out with specific package for home loans of up to Rs 5 lakh and those between Rs 5 and Rs 20 lakh. The IBA is also finalising a similar package for loans to small and medium enterprises.
“The package would be announced in a day or two,” he said, adding that IBA was working on the package which could include “several measures” apart from the cut in interest rates. Several banks including the country’s largest lender, State Bank of India, Oriental Bank of Commerce and Uco Bank have said they are examining the possibility of home loan rate cut between 100 and 300 basis points.
By Oliver Richards 13 December 2008
The number of undernourished people in the world has increased from 923 million in 2007 to 963 million in 2008. This disturbing figure comes from a report on world hunger released on December 9 by the Rome-based UN Agency, the Food and Agriculture Organization (FAO), entitled The State of Food Insecurity in the World 2008.
The report notes that the number of chronically hungry people rose by 75 million in 2007, while the 2008 figure shows an increase of 40 million. The recent increase in the number of hungry people has been exacerbated by high food prices, especially in developing countries.
In a news release on the FAO web site, FAO Assistant Director-General Hafez Ghanem underscored the difficulties being faced by people in the developing world:
"For millions of people in developing countries, eating the minimum amount of food every day to live an active and healthy life is a distant dream. The structural problems of hunger, like the lack of access to land, credit and employment, combined with high food prices remain a dire reality."
The report is the ninth in a series that began in 1996 at the World Food Summit (WFS), which set up the goal of halving world hunger by 2015. While the WFS called for the number of hungry people to decline by 50 percent, the UN's Millennium Development Goal (MGD) has set a target to cut in half the proportion of those suffering malnutrition.
Given the upsurge in food prices and other problems, it will continue to be difficult to achieve either goal by 2015. With the increase to 963 million hungry people, it would be necessary to reduce the number of hungry people by about 480 million. And, while the proportion of undernourished people (the MDG measurement) had been decreasing, from 20 percent in 1990-92 to 16 percent in 2003-05, it appears that this progress is being reversed, moving back up to about 17 percent.
The distribution of undernourished people in the world is largely concentrated in the developing world, although there were 16 million undernourished persons in developed countries in 2003-2005. Among the 832 million chronically hungry persons in 2003-2005, 65 percent were concentrated in India, China, the Democratic Republic of the Congo, Bangladesh, Indonesia, Pakistan, and Ethiopia.
In sub-Saharan Africa, while the proportion of people who are chronically hungry was reduced between the early 1990s and 2003-2005, one in three persons still remains undernourished. However, most of the numerical increase in the undernourished has come from the Democratic Republic of Congo, which has suffered from a persistent conflict resulting in an increase from 11 million to 43 million chronically hungry people.
While South America has been one of the most successful sub-regions in reducing hunger, this success has not been uniform throughout the Latin American and Caribbean region. In Haiti, for example, 58 percent of the population suffers from chronic hunger.
The US invasions of Afghanistan and Iraq have had a direct, negative impact on levels of undernourishment in the Near East and North Africa regions, which have generally experienced some of the lowest levels of undernourishment. The number of chronically hungry undernourished persons in the region nearly doubled, from 15 million in 1990-92 to 28 million in 2003-2005. This number has increased by 4.9 million in Afghanistan, and by 4.1 million in Iraq.
While there has been some modest progress in Asia and the Pacific regions, "nearly two-thirds of the world's hungry people still live in Asia," according to the FAO report.
Since 1992, barely a third of the developing countries have been able to reduce the number of those suffering from chronic hunger. The findings show that those hardest hit by increases in food prices were the poor, the landless, and female-headed households.
Low-income families are more likely to be "net food buyers," or households that consume a higher value of food staples than the value they produce, who stand to lose from an increase in the price of food staples.
While landowners are in a good position to gain from food price increases, the report notes, "Across the board, high food prices hit landless households hardest."
Female-headed households will also suffer proportionally more than male-headed households. This is due to female-headed households' tendency to spend a higher proportion of income on food, heightening the impact of food price increases, and the gender-specific obstacles that women face, which may restrict their access to certain resources such as land and credit.
Facing higher food prices, households may try to cope by changing the quality, quantity, and diversity of foods eaten, or make cuts in other areas such as health care and education. The first strategy results in malnutrition and higher risks of deficiencies in essential micronutrients, especially among women and children.
The story of Drissa Kone, living in Côte d'Ivoire, illustrates some of the problems that arise as individuals attempt to save money on medicine. Suffering from a severe respiratory infection, he has turned to counterfeit medicines, which sell for a fraction of the price of legitimate medicines but are of questionable quality and may even further harm his health.
The FAO has analyzed the key determinants of countries' vulnerability to high food prices: whether they are net importers of energy products and cereals, relative levels of poverty, and prevalence of undernourishment. The report discusses the diverse number of ways in which a food crisis can arise, resulting from both natural and man-made disasters.
Natural disasters can be classified by whether they are "slow onset" or "sudden onset." While slow onset disasters, such as droughts, have constituted the majority of natural disasters, sudden onset disasters, such as hurricanes or earthquakes, increased from 14 percent of all natural disasters in the 1980s to 27 percent in 2000.
According to the FAO, man-made disasters include both war or conflict and socio-economic shocks that may be internal or external. War has been the primary cause of man-made disasters, although disasters arising from socio-economic shocks have risen from 2 percent in the 1980s to 27 percent in 2000.
As the WSWS wrote in a three-part series, "The world food crisis and the capitalist market," the sources of the current food crisis "lie in economic and political processes of privatization and price speculation that have unfolded over the past three decades and are bound up with the globalization of capitalist agriculture."
The world is presently reeling from a gigantic "socio-economic shock," in the form of a developing global financial crisis, which will inevitably exacerbate the world hunger crisis, as millions of people find themselves jobless, homeless, and are thrust deeper into poverty.
That nearly 1 billion people are suffering from hunger is yet another testament to the irrational allocation of resources under capitalism. As the foreword to the report notes: "Hunger has increased as the world has grown richer and produced more food than ever in the last decade."
While the capitalist mode of production has revolutionized the productive forces, developing the capacity to feed every person on earth and eliminate hunger, the social relations of production have become a fetter upon the realization of this goal. The FAO's The State of Food Insecurity in the World 2008 documents the devastating impact of the growth of social inequality—in the form of chronic hunger—on large numbers of the world's population.
Inflation eases to 8 per cent
Business Line, NEW DELHI: PTI
Inflation rate fell further to 8 per cent for the week ended November 29 mainly on account of declining prices of fruits and vegetables. The wholesale price-based inflation fell by 0.4 per cent from 8.4 per cent in the previous week. The inf lation was 3.89 per cent during the corresponding period a year-ago.
In primary articles group, the prices of fruits, vegetables, barley and grams declined during the week. As far as manufactured items were concerned, unrefined oil, gur, and rapeseed and mustard oil became cheaper. The inflation rate has been declining after it touched a peak of 12.82 per cent in August.
Among other important items, the prices of cement too dropped marginally during the week, pulling down the index of Non-Metallic Mineral Products group by 0.1 per cent. The items that became expensive include safety matches, ragi, urad, bajra, maize, and groundnut seed and oil. Paper and paper products and plastic items like PVC fitting and accessories also became dearer. There was no movement in the index of Fuel, Power, Light and Lubricants during the week. However, the inflation data for the week ended November 29 does not capture the impact of the cut in prices of petrol and diesel by the government by Rs 5 and Rs 2 per litre, respectively.
Besides, it also does not reflect the price reductions following four per cent across-the-board cut in excise duty announced on Sunday as part of the stimulus package to boost economy. Once the impact of these decisions is reflected in the wholesale pri ces, the inflation rate could decline further. The inflation rate for the week ended October 4 was revised to 11.49 per cent from the provisional estimate of 11.44 per cent. -
RBI cautions banks over realty loans
Business Standard
Asks lenders to make sure that end use of advances to commercial real estate. The Reserve Bank of India (RBI) may have relaxed norms for lending to commercial real estate by banks, but prudence in lending still tops the central bank’s agenda.
RBI has asked banks to be cautious about the end use of funds lent to real estate companies to ensure that loans are for construction and not for refinancing the existing loans or paying back foreign shareholders or private equity shareholders who want to exit.
The central bank has told lenders to take caution as an informal guideline, even as risk weights have been brought down for exposure to real estate.
The risk weight is a method for classification of assets on the basis of weightage allocated in proportion to the riskiness of the loan portfolio. The higher the risk weight, the higher is the risk.
A few weeks ago, RBI brought down the risk weight on commercial real estate loans from 125 per cent to 0.4 per cent.
Banking sources said the boom in the real estate sector was primarily driven by foreign funds, mostly in the form of private equity, which had funded through direct equity or debt or a combination of convertible instruments.
“With a sharp downturn in the real estate sector, most of these equity-holders want to exit at this point of time, suffering a loss. This is because they are of the view that the situation might get worse. Therefore, RBI fears that the fresh loans given to real estate players should not get used for financing the debt or equity components of the finance by private equity players.
This is the reason why the banks are so reluctant to finance real estate companies even when liquidity is not a problem,” said a banker active in real estate lending. According to a merchant banker involved in structuring PE deals, most of the financing done by foreign funds or private equity parties carry a call option. The call option clause in the investment agreement provides the option to the PE to recall money if certain conditions are not met or if a situation turns adverse.
A director on the board of Vijaya Bank said there is concern over deteriorating credit profile of real estate firms and entities, including non-banking finance companies (NBFCs), which have funding exposure to them. Why should banks take extra exposure when chances of default may grow,” asked the Vijaya bank director.
“Given the sudden drop in demand in commercial real estate, some PE funds may not feel confident about the future of investments. Also, global parents of these funds have been hit hard by the financial crisis so they would like to retrieve money for investments,” a merchant banker added.
RBI chief calls for ‘significant’ policy action to tackle crisis
Business Line Kolkata, Dec. 11
Extends Rs 9,000-cr line of credit to National Housing Bank, Exim Bank.
The government and the Reserve Bank of India need to take “significant” steps to counter the “significant crisis”, Dr D. Subbarao, Governor, Reserve Bank of India, said here on Thursday.
“The crisis has evolved and is evolving. Nobody around the world has the exact picture of how big the crisis is. It is a significant crisis and we need to take significant policy actions,” he told reporters after RBI’s Central Board Meeting here on Thursday.
Talking about the way forward, he said, “The situation is uncertain and it is not possible for us to calibrate a precise roadmap but we will continue to take appropriate measures at the appropriate time,” he added. The Reserve Bank, Dr Subbarao said, would review the inflation forecast in the next monetary policy scheduled for January 27, 2009.
On rate cuts
On being asked about further rate cuts, the RBI Governor said, “We are constantly reviewing the situation, we have already adjusted our CRR and policy rates and we will take appropriate measures at the right time.” According to him, the monetary policy measures taken by the central bank have so far yielded positive results. Banks should take the cue from the rate cuts announced by the apex bank on Saturday and should revise their lending rates accordingly, he pointed out.
Dr Subbarao further said that RBI would closely monitor the developments in the global and domestic financial markets and would try to minimise the stress on various sectors of the economy on account of the international financial crisis and the global slowdown.
Credit, refinance
The apex bank on Thursday announced Lines of Credit worth Rs 9,000 crore to the National Housing Bank and Exim Bank. The bank’s Central Board on Thursday approved refinance facility of Rs 4,000 crore to NHB and Rs 5,000 crore to the Exim Bank under the prevailing repo rate (6.5 per cent) under Liquidity Adjustment Facility for a period of 90 days. “During the 90-day period, the amount can be flexibly drawn and repaid and at the end of the 90-day period, the drawal can also be rolled over. “This refinance facility will be available up to March 31, 2010,” the RBI Governor said.
Support for housing
This would help provide liquidity support to the housing sector, particularly to the housing finance companies, which have been adversely affected by the recent financial market developments, he said. The refinance facility to Exim Bank would help mitigate pressures on account of the recent developments on loan disbursements to Indian exporting companies, he said.
PSU banks set to offer cheaper, easy home loans
Business Line New Delhi, Dec 11
Package for small, medium sector also on cards.
New Package
Housing loans will be available at cheaper rates and under simpler terms - The modalities of the new package were being worked out
Home loan borrowers looking for finance of up to Rs 20 lakh are likely to see a slew of concessions coming their way in the next few days. State-owned banks are close to finalising a package to give a boost to the housing sector by making such loans available at cheaper rates and under simpler terms.
The move to provide relief for home loan borrowers comes in the wake of the Government’s recent fiscal stimulus booster in which it promised that public sector banks (PSBs) would shortly announce a package for two categories – up to Rs 5 lakh, and between Rs 5 lakh and Rs 20 lakh.
Borrowers are now expecting at least 200-300 basis point cut in interest rates as relief under the package. They want interest rates on fixed rate home loans to come down to between 7 and 9 per cent say for a 10-year term period.
“The package that we are discussing will not be confined to interest rates. If we are going to stop with interest reduction, it will not augur well for the package. There has to be other incentives,” Mr T.S. Narayanasami, Chairman, Indian Banks Association (IBA), told reporters after an IBA meeting here on Thursday.
The Finance Secretary, Mr Arun Ramanathan, and senior Finance Ministry officials were also present at the meeting.
The IBA Chairman said that bankers were still discussing the modalities on how the package should be structured and that they had not come to any definite conclusion. Besides interest rate reduction, the public sector banks were also looking to include concession on margin requirements, waiving of processing fee for loans and changes in pre-payment clause in the package, Mr Narayanasami said.
PSBs are also looking at making credit more accessible and cheaper for small and medium enterprises (SMEs). Indications are that some form of interest subvention would be provided.
However, for the proposed interest concession on home loans up to Rs 20 lakh, Mr Narayanasami made it clear that no interest subvention was contemplated or even necessary.
“The whole exercise is to make interest affordable for housing and SME sectors. There will be a pragmatic view in cutting interest. We have not decided to what extent we will cut the interest rate. You wait for the package to be announced in a day or two,” he said.
Meanwhile, sources in the banking industry said that at today’s meeting the issue of cost of funds for banks was discussed, especially from the context of bulk deposits. The Finance Ministry had issued instructions that there should be no acceptance of bulk deposits outside the card rates.
Central public sector enterprises (CPSEs) were also instructed to strictly adhere to Finance Ministry guidelines and desist from inviting bids from banks for parking their surplus funds. The practice of inviting bids were leading to competition among PSBs and thereby raising their cost of deposits, which in turn led to increased lending rates, according to the Finance Ministry.
The Government was now closely monitoring, through a committee, as to whether PSBs as well as CPSEs were complying with the directions or not, sources said.
Banks want subsidy to cut home loan rates
Business Standard
Public sector banks are likely to announce a 50 to 100 basis point cut in interest rates on home loans up to Rs 20 lakh. The government is also considering an interest subvention for loans below Rs 5 lakh.
Banking sources said banks may provide loans up to Rs 5 lakh at around 8.5 per cent,and those between Rs 5 lakh and 20 lakh will carry an interest rate of 9.25 per cent a year. At present, interest rates on home loans below Rs 20 lakh, with a tenure of up to 10 years, is 9.5 to 10.5 per cent.
“The comfort level for banks is 8.5 per cent for home loans up to Rs 5 lakh and 9.25 per cent for Rs 5 lakh-20 lakh,” a public sector bank chief, who attended a meeting in Delhi to discuss the package, said.
To facilitate banks to lend at these rates, sources said that RBI may relax risk weights for these categories of housing loans if the banks reduce the margin money from 25 per cent to 10 per cent. At present, the risk weight is 50 per cent for home loans up to Rs 20 lakh.
A reduction in the margin requirement, or the part of the loan paid by borrower upfront, will mean that banks will have to provide more funds to the extent of the increase in the actual loan amount. A relaxation in risk weights will reduce the cost of the loan for the banks.
Other incentives that were discussed included a waiver of processing charges for home borrowers and a five-year lock-in period on interest rates.
Apart from housing, the public sector banks are also likely to give 50-basis-point concession in lending rates to Small and Medium Enterprises (SMEs) hit by the economic downturn.
“We have not come to any definite conclusion (on home loans). Some package will be formalised in the next one or two days,” Indian Banks Association Chairman TS Narayanasami said after meeting Finance Secretary Arun Ramanathan.
PSBs may waive pre-payment penalty on home loans
Economic Times NEW DELHI:
Public sector banks (PSB) are considering a suggestion to waive pre-payment penalty for home loans up to Rs 20 lakh. At present, banks charge anywhere between 1% and 3% of outstanding loan amount as additional interest if a consumer wants to repay the loan amount before the initially agreed loan tenure.
“We are considering a proposal to either completely waive the pre-payment penalty or reduce it significantly,” said the chairman of a PSB, on condition of anonymity.
The Indian Banks’ Association (IBA) is examining a proposal in this regard and may come out with specific guidelines in a few days. IBA is also examining the possibility of bringing down or waiving the processing fee and lowering the requirement of margin money for small home loans. All these steps are part of a government plan to revive the moribund housing sector. A revival in this sector could have positive spin-offs across various industries, notably cement and steel. Banks may resort to doing away with pre-payment penalties in order to make more small home loans available to consumers at cheaper rates and relaxed norms. All these measures are in addition to rate cuts of up to 300 basis points being planned by PSBs, which will bring down interest rates on loans up to Rs 20 lakh to between 8 and 10%.
“We are examining the possibility of waiving the processing fee and bringing down the requirement of margin money,” IBA chairman TS Narayanasamy told reporters in New Delhi after meeting chiefs of other banks and senior finance ministry officials including finance secretary Arun Ramanathan.
Mr Narayanasamy, who is also the chairman of Bank of India (BoI), said that IBA would come out with specific package for home loans of up to Rs 5 lakh and those between Rs 5 and Rs 20 lakh. The IBA is also finalising a similar package for loans to small and medium enterprises.
“The package would be announced in a day or two,” he said, adding that IBA was working on the package which could include “several measures” apart from the cut in interest rates. Several banks including the country’s largest lender, State Bank of India, Oriental Bank of Commerce and Uco Bank have said they are examining the possibility of home loan rate cut between 100 and 300 basis points.
BANKING NEWS - AIBEA - 13.12.2008
Workers occupy auto parts plant in northern Germany
By Lucas Adler ,12 December 2008
On December 5, about 100 employees of the bankrupt auto parts supplier HWU occupied their factory in the small town of Hohenlockstedt, north of Hamburg. The workers are determined to defend their jobs and prevent the planned closure of the plant at the end of the year.
The workers’ union, IG Metall, is attempting to end the factory occupation following complaints from union bureaucrats at a major auto manufacturer that the action was threatening to disrupt production at that other firm.
HWU produces parts for catalytic converters, steering wheels and door locks. In June 2008, HWU was sold by its parent company, the Vollmann Group, to Horst Strodtkötter, a former employee at the factory. The workforce only learned of their new owner June 30, at a factory meeting that the new managing director did not attend.
Then six weeks ago, on October 29, Strodtkötter informed the workforce that HWU was bankrupt and unable to pay their wages in October. Strodtkötter declared that a 30 percent drop in orders resulting from the current crisis in the automotive industry had driven the company into bankruptcy.
The workers reacted at that time with a spontaneous 24-hour occupation of the premises. Their main concern was to prevent the removal of any parts or machinery that would make further production at the factory impossible. Following the declaration of a bankruptcy administrator that the company had sufficient orders, and that the outstanding wages could be paid out of insolvency funds (Insolvenzgeld--money paid by the government to workers at bankrupt firms, out of a levy on the owners), the employees returned to work.
Since then the workforce has been kept completely in the dark about any further developments. There was no further information on the future of the factory from either the managing director or the bankruptcy trustee. When it was announced last week that at the end of the year the insolvency funds would be exhausted, workers reoccupied the plant on Friday.
On Tuesday morning the factory council finally informed the workforce about the plan to close the plant. The majority of workers are to be made redundant by December 31. A skeleton staff of between 25 to 30 workers will be retained until the end of March to wind down the factory. The only hope for any retention of jobs, according to IG Metall, was via the creation of some sort of transfer company (a firm specializing in matching laid-off workers with new jobs).
The workers at the factory, however, place absolutely no confidence in such a transfer company. They are all convinced that the chances of finding alternative work in the present economic climate are almost zero. Many workers have been employed at the factory for over two decades and are ill-equipped to find new jobs at this stage of their lives and careers.
Hohenlockstedt is a small town of approximately 6,200 inhabitants in rural Schleswig-Holstein. At its peak, the factory was a thriving enterprise with up to 700 employees. Older inhabitants of the town recall when the factory operated three-shifts some 50 years ago. But such times are long past.
One worker with 37 years in the plant told a WSWS reporter how he had begun his apprenticeship there as a toolmaker and in recent years had worked predominantly in the production of spare parts. The situation for many workers is very bitter, he explained:
“Entire lives are at stake. There are many workers who began their working lives here, built a house and have small children. And then suddenly one day we were informed that everything is gone. After working here for over 35 years, I’m told that as of January 1, I can only inspect my workplace from the other side of the factory gate.”
An HWU employee who has worked as a toolmaker at the factory for 20 years stressed that the jobs situation in the region was very bad: “In the extreme case, you would have to move away from here to find new work. But under conditions where everybody has the same idea it will be difficult to find work.”
A somewhat younger worker, who started at the factory as an apprentice in 1988, pointed to the anger of the HWU employees—in particular because they had been informed about the factory’s plight at such a late stage. Workers are angry that all the skills and knowledge built up over decades of employment are now considered worthless and summarily being dismissed.
The WSWS also spoke with the chairman of the works council, Steffen Schmidt, and his deputy, Alfred Butt. When asked why IG Metall had done nothing to organise a more extensive campaign to defend the workers’ jobs, they responded by referring to disputes between the “works council princes” (union officials) active in the big car plants, who are intent on defending their own factories at the expense of all others and therefore make impossible any sort of broader solidarity between different plants and their workforces.
The perspective of IG Metall
The announcement of the closure of the facility was preceded by a series of measures aimed at reorganising the factory and which involved considerable sacrifices on the part of the workforce. The union enforced these measures by arguing that they were the only alternative to job cuts and HWU’s closing down. The result now is the complete closure of the plant. The perspective of ‘saving jobs’ by accepting wage cuts and other concessions failed catastrophically.
In 2002, IG Metall signed a contract with HWU involving a year-long reduction of the working week from 35 to 30 hours for its 225 employees with a 14 percent cut in wages. Just two years after the expiry of this contract, management announced the first bankruptcy of the factory in October 2005. The bankruptcy procedure at that time called for the shedding of 80 jobs.
IG Metall officials reacted by reaching a new contract, which abolished existing Christmas benefits and accepted other concessions. This contract ran until September 2007, when it was replaced by another involving further attacks on wages and working conditions, including the abolition of holiday pay. In return, workers were given a guarantee that their jobs would be safe until the end of 2009. This assurance has now been consigned to the waste bin following the latest declaration of bankruptcy.
The various concessions made by the trade union were incapable of saving a single job. Instead the workers were left unprepared for the planned closure of the factory. The union and the works council now regard the closure of the factory as inevitable. Their only concern is how best to negotiate the option of a possible transfer company.
IG Metall is trying to call off the occupation to ensure that the auto companies supplied by HWU receive the needed parts. The bureaucracy’s main concern is the smooth working of the German auto industry, not the fate of the HWU or any other workers.
HWU workers should establish contact with workers at these companies, independently of IG Metall, and organise a common struggle to defend jobs and production. The only future for auto workers lies in a fight for socialist policies and the nationalization of the industry under workers’ control.
In order to step up pressure on workers to return to work, managing director Strodtkötter posted a letter on the company bulletin board Tuesday afternoon threatening the immediate sacking of workers who refused to return to work. He also announced that striking workers would be forced to pay large sums to compensate for lost production.
The occupation of the HWU factory should be supported by all workers. It raises important political questions, which are relevant for workers at other companies. The most important of these questions is: who controls the productive forces and in whose interest should they be organised?
Workers Struggles:
Argentine bank employees to strike this week
Bank employees in Argentina last week rejected a 5 percent wage increase. Union leader Juan José Zanola called the offer a provocation. He also accused the banks of hiring goons to frighten bank employees into resigning. Over 1,500 employees have been forced to resign that way; a procedure that the union calls ‘disguised sackings.'
"In any case," he said, "we will strike on December 11 and 12, and we decided to add the 15th and 16th to continue to press for our wage demands." Contract negotiations are at a standstill, despite a government imposed cooling-off period and the intervention of a government mediator.
Argentine banks have been hit hard by the world financial crisis. This is now taking the form of capital flight. Over US $ 4 billion left the country in October. The total for the year is expected to top US $ 25 billion.
French ports workers strike
Port workers at the Fos-Lavera oil hub near Marseille have been on strike for a week, according to latest reports. Their action has blocked almost 50 ships, including 13 oil tankers and 22 oil product vessels, three chemical and seven gas tankers from entering France’s largest oil port.
The strike is in protest at the privatisation of the port complex. French unions and port employers signed an agreement in October, opening the way to privatise seven ports, including Fos-Lavera. The strategic port, with an annual oil traffic of 64.2 million tonnes, supplies crude to six refineries in southern and eastern France with an output capacity of 800,000 barrels per day (bpd). Crude from the terminal also supplies the 310,000-bpd Miro refinery in Germany and the 68,000-bpd Cressier refinery in Switzerland.
France’s petroleum industry body, UFIP, said that the dispute had cost the oil industry US$1.0-1.5 million a day and was forcing refiners to lower their output.
A Marseille port spokeswoman said that a final deal, which will see private companies take over unloading at the docks previously run by the state, needs to be approved by the end of January.
Mass demonstrations in Ireland to counter attacks on education
Between 40,000 and 70,000 people protested in Dublin on December 6 against spending cuts in education in what is believed to have been the largest demonstration in the capital since protests against the Iraq war. The protest formed part of a growing number of demonstrations against recent government policy announcements.
The demonstration was intended to highlight issues such as the increase in the pupil-teacher ratio, the removal of free book schemes and English support teachers, the condition of school buildings and the removal of grants for Traveller education.
Protesters carried numerous placards, including ones that read, “Schools Unite Against Cuts,” “Leave Our Kids Alone,” “Don’t Make Our Children Pay” and “28:1, Good Odds for a Horse, Not A Child.”
Teachers, parents and children marched from Parnell Square to Merrion Square as a series of nationwide protests against education cuts reached its climax. The march was organised jointly by the Association of Secondary Teachers (ASTI), the INTO and the Teachers’ Union of Ireland (TUI).
The unions claim that altogether 120,000 people have now marched against the school spending measures in the budget when previous demonstrations in Donegal, Cork, Galway and Tullamore are considered.
Tens of thousands of teachers, students and parents have held a series of protests against staff shortages and increased class sizes in recent months. The government recently gave in to one of the teachers’ demands and allocated additional funding to hire substitute teachers in secondary schools.
The government presented the 2009 budget in October, almost two months earlier than usual, to respond to a rising shortfall in tax revenues after Ireland slid into recession. This week, it said a further deterioration in public finances showed it would miss some targets set out in the 2009 budget. The government expects the 2009 budget deficit to reach 6.5 percent of gross domestic product, more than double the level allowed by European Union rules, despite cutting spending and raising several different taxes in October.
Irish childcare workers and parents protest
Hundreds of parents and childcare workers protested, December 11, in response to controversial government funding changes they believe could devastate the sector and lead to widespread creche closures, according to the Irish Independent.
The protests in Dublin and Cork are aimed at forcing a “re-think” on the Community Childcare Subvention Scheme (CCSS) that, critics claim, will generate both higher fees and the closure of smaller creches.
Childcare organiser at the union, SIPTU, Darrragh O’Connor said, “Up until recently, projects received a staffing grant that allowed them to set fees that took full account of the individual circumstances of each family. However, the introduction of the CCSS has seen this replaced by a rigid set of criteria that has seen fees rise dramatically for many low-wage families.”
In some cases, the impact on fees has been enormous—with some facilities increasing their charges for working parents by €113 a week. One parent, Michael Daly, of the Brooklodge Community Playschool, in Glanmire, Cork, said that the new government funding policies are making life impossible.
“There are roughly 40 children in the group—and it became very apparent last week that the playschool will be in a deficit of up to €4,000 and the parents will have to make-up the shortfall. And a lot of parents are finding it hard in the current economic climate,” he said.
Strike threats from UK postal workers
Postal workers in the Bridgwater area of Somerset have voted to strike over their working conditions, according to the BBC. Members of the Communication Workers Union (CWU) plan to walk out at Christmas in protest at their full-time jobs being replaced with part-time roles.
The dates of the strikes have yet to be announced.
Around 400 postal workers at the Bolton Mail Centre in Farnworth are to stage a 24-hour strike on December 19—one of the busiest mail days of the year—in protest at plans to close the centre.
The Stonehill Road depot is due to shut in 2010 as part of a Royal Mail cost-cutting exercise. In a ballot, CWU members at the depot voted by 77 percent in favour of the strike. Other Royal Mail centres at Stockport, Crewe and Liverpool will also be shut on the same day because of industrial action.
Rail workers on London Tube in second strike for pay parity
Rail workers responsible for finding structural faults and maintaining the electrical supply to London’s underground rail network began their second 36-hour strike December 7 after employer EDF Energy Powerlink refused to budge on their claim for pay parity with day workers.
Rail, Maritime and Transport union (RMT) General Secretary Bob Crow said, “Despite the overwhelming vote for action and an absolutely rock-solid strike in November, EDF Energy Powerlink has so far refused to acknowledge that shift testers should have pay-parity with their non-shift colleagues. Day-work staff rightly received a £3,000 increase for delivering flexibility, and their shift-working colleagues are simply seeking recognition of the flexibility they too have delivered, not least in accepting sweeping shift changes that have disrupted their work-life balance.”
Shift testers are responsible for finding and fixing faults at London Underground’s more than 250 power substations and maintaining the power supply. In ballots in October, RMT members voted by 21 to 2 for strike action and by 22 to 1 for action short of strikes. The first 36-hour strike by the 250 shift testers was held between November 16 and 18. Since November 16, they have made themselves unavailable for work after the end of any turns unless there is a direct and imminent danger to human life.
Demonstration by the Iraqi engineers in central Baghdad
Around 250 engineers took part in a sit-in, December 2, at Firdos Square in central Baghdad. The workers later on marched to the Ministry of Agriculture. Demonstrators demanded the restoration of professional allowances that were halted after April 9, 2003.
The protest was organised by the Union of Agricultural Engineers. Representatives of unions of teachers, veterinarians and health professionals also joined the protest. The president of the union announced that if its demands are not met by the Ministry of Agriculture, the union will call for a general strike in all the ministries across Iraq.
Striking Chevron oil workers injured by security forces in Nigeria
On December 3, striking workers at the Chevron plant in the Delta area of Nigeria set up a picket outside the plant. Vanguard reported that the strikers used more than 100 tankers to barricade the entrance to the plant and temporarily halted traffic along the NPA Expressway. The strikers were protesting the threatened sacking of 122 workers for indicating their interest in joining the National Union of Petroleum and Gas Workers (NUPENG).
According to Vanguard, “Anti-crime mobile, regular policemen and soldiers, who were drafted in to beef up security at the company, threw tear gas and used gun butts to beat members of the union in an orchestrated effort to break up their rank[s].”
Fifteen strikers were injured, and some of them had to be taken to hospital for treatment.
The local NUPENG chairperson, who was beaten by the security personnel, said, “We are here to tell Deltans [residents of the Niger Delta] and Nigerians of police and soldiers’ brutality on innocent Nigerians…. Today we are at Chevron’s gate right now to protest CNL management grand design to flush out NUPENG members in the company’s operations.” He claimed that Chevron gave the security operatives an order to shoot on sight.
Namibian fish factory workers on strike over pay
Workers at Pescanova fish factory in Lüderitz, Namibia, went out on strike on December 9, after pay negotiations failed to produce an agreement.
In previous years, there have been several strikes and other disputes at the factory. Last year, a strike over pay and the company’s failure to honor an agreement to make temporary workers permanent was narrowly averted.
Nigerian doctors on strike
Civil service doctors in Anambra State, Nigeria, have been on strike for two months. The dispute is over an unpaid 22 percent salary increase, which has been approved for doctors nationwide. Another cause of anger is the gulf that has opened up between their terms of employment and those of the specialist doctors.
Doctors employed within local government, where they are designated medial officers of health, and hospital consultants are continuing to work.
The all-out indefinite strike of Nigerian judiciary staff, which began on December 1, continues to paralyze the law courts. In Abakaliki, Ebonyi State, the gates of the High Court have been locked, and in other areas of the country, gates leading to judicial complexes have been barricaded.
A representative of the Judicial Staff Union of Nigeria told the press that the action, which is over pay and conditions, would last until the government calls the union back to the negotiating table.
United States - Oregon truckers protest termination of retiree benefits
Truckers rallied outside Oak Harbor Freight Lines in Portland, Oregon, last Thursday to protest the company's abrupt decision to strip retirees of health care benefits. The termination of retiree benefits is the company's latest maneuver during a strike involving about 600 truckers from Oregon, Washington, and Idaho that is now in its 12th week.
Bob Anderson, a 14-year driver at the Portland terminal, stated, "We believe our retirees have upheld their part of the bargain, and now the company is abandoning them. The retirees are the people who built Oak Harbor Freight. It seems as if the company is done with them now and wants to get rid of them."
Retiree Marv Deegan added, "What the company has done to us is making it difficult to eat. When you are on a fixed income and you have to pay a huge amount just to keep your health care, there is hardly enough money left for food."
By Lucas Adler ,12 December 2008
On December 5, about 100 employees of the bankrupt auto parts supplier HWU occupied their factory in the small town of Hohenlockstedt, north of Hamburg. The workers are determined to defend their jobs and prevent the planned closure of the plant at the end of the year.
The workers’ union, IG Metall, is attempting to end the factory occupation following complaints from union bureaucrats at a major auto manufacturer that the action was threatening to disrupt production at that other firm.
HWU produces parts for catalytic converters, steering wheels and door locks. In June 2008, HWU was sold by its parent company, the Vollmann Group, to Horst Strodtkötter, a former employee at the factory. The workforce only learned of their new owner June 30, at a factory meeting that the new managing director did not attend.
Then six weeks ago, on October 29, Strodtkötter informed the workforce that HWU was bankrupt and unable to pay their wages in October. Strodtkötter declared that a 30 percent drop in orders resulting from the current crisis in the automotive industry had driven the company into bankruptcy.
The workers reacted at that time with a spontaneous 24-hour occupation of the premises. Their main concern was to prevent the removal of any parts or machinery that would make further production at the factory impossible. Following the declaration of a bankruptcy administrator that the company had sufficient orders, and that the outstanding wages could be paid out of insolvency funds (Insolvenzgeld--money paid by the government to workers at bankrupt firms, out of a levy on the owners), the employees returned to work.
Since then the workforce has been kept completely in the dark about any further developments. There was no further information on the future of the factory from either the managing director or the bankruptcy trustee. When it was announced last week that at the end of the year the insolvency funds would be exhausted, workers reoccupied the plant on Friday.
On Tuesday morning the factory council finally informed the workforce about the plan to close the plant. The majority of workers are to be made redundant by December 31. A skeleton staff of between 25 to 30 workers will be retained until the end of March to wind down the factory. The only hope for any retention of jobs, according to IG Metall, was via the creation of some sort of transfer company (a firm specializing in matching laid-off workers with new jobs).
The workers at the factory, however, place absolutely no confidence in such a transfer company. They are all convinced that the chances of finding alternative work in the present economic climate are almost zero. Many workers have been employed at the factory for over two decades and are ill-equipped to find new jobs at this stage of their lives and careers.
Hohenlockstedt is a small town of approximately 6,200 inhabitants in rural Schleswig-Holstein. At its peak, the factory was a thriving enterprise with up to 700 employees. Older inhabitants of the town recall when the factory operated three-shifts some 50 years ago. But such times are long past.
One worker with 37 years in the plant told a WSWS reporter how he had begun his apprenticeship there as a toolmaker and in recent years had worked predominantly in the production of spare parts. The situation for many workers is very bitter, he explained:
“Entire lives are at stake. There are many workers who began their working lives here, built a house and have small children. And then suddenly one day we were informed that everything is gone. After working here for over 35 years, I’m told that as of January 1, I can only inspect my workplace from the other side of the factory gate.”
An HWU employee who has worked as a toolmaker at the factory for 20 years stressed that the jobs situation in the region was very bad: “In the extreme case, you would have to move away from here to find new work. But under conditions where everybody has the same idea it will be difficult to find work.”
A somewhat younger worker, who started at the factory as an apprentice in 1988, pointed to the anger of the HWU employees—in particular because they had been informed about the factory’s plight at such a late stage. Workers are angry that all the skills and knowledge built up over decades of employment are now considered worthless and summarily being dismissed.
The WSWS also spoke with the chairman of the works council, Steffen Schmidt, and his deputy, Alfred Butt. When asked why IG Metall had done nothing to organise a more extensive campaign to defend the workers’ jobs, they responded by referring to disputes between the “works council princes” (union officials) active in the big car plants, who are intent on defending their own factories at the expense of all others and therefore make impossible any sort of broader solidarity between different plants and their workforces.
The perspective of IG Metall
The announcement of the closure of the facility was preceded by a series of measures aimed at reorganising the factory and which involved considerable sacrifices on the part of the workforce. The union enforced these measures by arguing that they were the only alternative to job cuts and HWU’s closing down. The result now is the complete closure of the plant. The perspective of ‘saving jobs’ by accepting wage cuts and other concessions failed catastrophically.
In 2002, IG Metall signed a contract with HWU involving a year-long reduction of the working week from 35 to 30 hours for its 225 employees with a 14 percent cut in wages. Just two years after the expiry of this contract, management announced the first bankruptcy of the factory in October 2005. The bankruptcy procedure at that time called for the shedding of 80 jobs.
IG Metall officials reacted by reaching a new contract, which abolished existing Christmas benefits and accepted other concessions. This contract ran until September 2007, when it was replaced by another involving further attacks on wages and working conditions, including the abolition of holiday pay. In return, workers were given a guarantee that their jobs would be safe until the end of 2009. This assurance has now been consigned to the waste bin following the latest declaration of bankruptcy.
The various concessions made by the trade union were incapable of saving a single job. Instead the workers were left unprepared for the planned closure of the factory. The union and the works council now regard the closure of the factory as inevitable. Their only concern is how best to negotiate the option of a possible transfer company.
IG Metall is trying to call off the occupation to ensure that the auto companies supplied by HWU receive the needed parts. The bureaucracy’s main concern is the smooth working of the German auto industry, not the fate of the HWU or any other workers.
HWU workers should establish contact with workers at these companies, independently of IG Metall, and organise a common struggle to defend jobs and production. The only future for auto workers lies in a fight for socialist policies and the nationalization of the industry under workers’ control.
In order to step up pressure on workers to return to work, managing director Strodtkötter posted a letter on the company bulletin board Tuesday afternoon threatening the immediate sacking of workers who refused to return to work. He also announced that striking workers would be forced to pay large sums to compensate for lost production.
The occupation of the HWU factory should be supported by all workers. It raises important political questions, which are relevant for workers at other companies. The most important of these questions is: who controls the productive forces and in whose interest should they be organised?
Workers Struggles:
Argentine bank employees to strike this week
Bank employees in Argentina last week rejected a 5 percent wage increase. Union leader Juan José Zanola called the offer a provocation. He also accused the banks of hiring goons to frighten bank employees into resigning. Over 1,500 employees have been forced to resign that way; a procedure that the union calls ‘disguised sackings.'
"In any case," he said, "we will strike on December 11 and 12, and we decided to add the 15th and 16th to continue to press for our wage demands." Contract negotiations are at a standstill, despite a government imposed cooling-off period and the intervention of a government mediator.
Argentine banks have been hit hard by the world financial crisis. This is now taking the form of capital flight. Over US $ 4 billion left the country in October. The total for the year is expected to top US $ 25 billion.
French ports workers strike
Port workers at the Fos-Lavera oil hub near Marseille have been on strike for a week, according to latest reports. Their action has blocked almost 50 ships, including 13 oil tankers and 22 oil product vessels, three chemical and seven gas tankers from entering France’s largest oil port.
The strike is in protest at the privatisation of the port complex. French unions and port employers signed an agreement in October, opening the way to privatise seven ports, including Fos-Lavera. The strategic port, with an annual oil traffic of 64.2 million tonnes, supplies crude to six refineries in southern and eastern France with an output capacity of 800,000 barrels per day (bpd). Crude from the terminal also supplies the 310,000-bpd Miro refinery in Germany and the 68,000-bpd Cressier refinery in Switzerland.
France’s petroleum industry body, UFIP, said that the dispute had cost the oil industry US$1.0-1.5 million a day and was forcing refiners to lower their output.
A Marseille port spokeswoman said that a final deal, which will see private companies take over unloading at the docks previously run by the state, needs to be approved by the end of January.
Mass demonstrations in Ireland to counter attacks on education
Between 40,000 and 70,000 people protested in Dublin on December 6 against spending cuts in education in what is believed to have been the largest demonstration in the capital since protests against the Iraq war. The protest formed part of a growing number of demonstrations against recent government policy announcements.
The demonstration was intended to highlight issues such as the increase in the pupil-teacher ratio, the removal of free book schemes and English support teachers, the condition of school buildings and the removal of grants for Traveller education.
Protesters carried numerous placards, including ones that read, “Schools Unite Against Cuts,” “Leave Our Kids Alone,” “Don’t Make Our Children Pay” and “28:1, Good Odds for a Horse, Not A Child.”
Teachers, parents and children marched from Parnell Square to Merrion Square as a series of nationwide protests against education cuts reached its climax. The march was organised jointly by the Association of Secondary Teachers (ASTI), the INTO and the Teachers’ Union of Ireland (TUI).
The unions claim that altogether 120,000 people have now marched against the school spending measures in the budget when previous demonstrations in Donegal, Cork, Galway and Tullamore are considered.
Tens of thousands of teachers, students and parents have held a series of protests against staff shortages and increased class sizes in recent months. The government recently gave in to one of the teachers’ demands and allocated additional funding to hire substitute teachers in secondary schools.
The government presented the 2009 budget in October, almost two months earlier than usual, to respond to a rising shortfall in tax revenues after Ireland slid into recession. This week, it said a further deterioration in public finances showed it would miss some targets set out in the 2009 budget. The government expects the 2009 budget deficit to reach 6.5 percent of gross domestic product, more than double the level allowed by European Union rules, despite cutting spending and raising several different taxes in October.
Irish childcare workers and parents protest
Hundreds of parents and childcare workers protested, December 11, in response to controversial government funding changes they believe could devastate the sector and lead to widespread creche closures, according to the Irish Independent.
The protests in Dublin and Cork are aimed at forcing a “re-think” on the Community Childcare Subvention Scheme (CCSS) that, critics claim, will generate both higher fees and the closure of smaller creches.
Childcare organiser at the union, SIPTU, Darrragh O’Connor said, “Up until recently, projects received a staffing grant that allowed them to set fees that took full account of the individual circumstances of each family. However, the introduction of the CCSS has seen this replaced by a rigid set of criteria that has seen fees rise dramatically for many low-wage families.”
In some cases, the impact on fees has been enormous—with some facilities increasing their charges for working parents by €113 a week. One parent, Michael Daly, of the Brooklodge Community Playschool, in Glanmire, Cork, said that the new government funding policies are making life impossible.
“There are roughly 40 children in the group—and it became very apparent last week that the playschool will be in a deficit of up to €4,000 and the parents will have to make-up the shortfall. And a lot of parents are finding it hard in the current economic climate,” he said.
Strike threats from UK postal workers
Postal workers in the Bridgwater area of Somerset have voted to strike over their working conditions, according to the BBC. Members of the Communication Workers Union (CWU) plan to walk out at Christmas in protest at their full-time jobs being replaced with part-time roles.
The dates of the strikes have yet to be announced.
Around 400 postal workers at the Bolton Mail Centre in Farnworth are to stage a 24-hour strike on December 19—one of the busiest mail days of the year—in protest at plans to close the centre.
The Stonehill Road depot is due to shut in 2010 as part of a Royal Mail cost-cutting exercise. In a ballot, CWU members at the depot voted by 77 percent in favour of the strike. Other Royal Mail centres at Stockport, Crewe and Liverpool will also be shut on the same day because of industrial action.
Rail workers on London Tube in second strike for pay parity
Rail workers responsible for finding structural faults and maintaining the electrical supply to London’s underground rail network began their second 36-hour strike December 7 after employer EDF Energy Powerlink refused to budge on their claim for pay parity with day workers.
Rail, Maritime and Transport union (RMT) General Secretary Bob Crow said, “Despite the overwhelming vote for action and an absolutely rock-solid strike in November, EDF Energy Powerlink has so far refused to acknowledge that shift testers should have pay-parity with their non-shift colleagues. Day-work staff rightly received a £3,000 increase for delivering flexibility, and their shift-working colleagues are simply seeking recognition of the flexibility they too have delivered, not least in accepting sweeping shift changes that have disrupted their work-life balance.”
Shift testers are responsible for finding and fixing faults at London Underground’s more than 250 power substations and maintaining the power supply. In ballots in October, RMT members voted by 21 to 2 for strike action and by 22 to 1 for action short of strikes. The first 36-hour strike by the 250 shift testers was held between November 16 and 18. Since November 16, they have made themselves unavailable for work after the end of any turns unless there is a direct and imminent danger to human life.
Demonstration by the Iraqi engineers in central Baghdad
Around 250 engineers took part in a sit-in, December 2, at Firdos Square in central Baghdad. The workers later on marched to the Ministry of Agriculture. Demonstrators demanded the restoration of professional allowances that were halted after April 9, 2003.
The protest was organised by the Union of Agricultural Engineers. Representatives of unions of teachers, veterinarians and health professionals also joined the protest. The president of the union announced that if its demands are not met by the Ministry of Agriculture, the union will call for a general strike in all the ministries across Iraq.
Striking Chevron oil workers injured by security forces in Nigeria
On December 3, striking workers at the Chevron plant in the Delta area of Nigeria set up a picket outside the plant. Vanguard reported that the strikers used more than 100 tankers to barricade the entrance to the plant and temporarily halted traffic along the NPA Expressway. The strikers were protesting the threatened sacking of 122 workers for indicating their interest in joining the National Union of Petroleum and Gas Workers (NUPENG).
According to Vanguard, “Anti-crime mobile, regular policemen and soldiers, who were drafted in to beef up security at the company, threw tear gas and used gun butts to beat members of the union in an orchestrated effort to break up their rank[s].”
Fifteen strikers were injured, and some of them had to be taken to hospital for treatment.
The local NUPENG chairperson, who was beaten by the security personnel, said, “We are here to tell Deltans [residents of the Niger Delta] and Nigerians of police and soldiers’ brutality on innocent Nigerians…. Today we are at Chevron’s gate right now to protest CNL management grand design to flush out NUPENG members in the company’s operations.” He claimed that Chevron gave the security operatives an order to shoot on sight.
Namibian fish factory workers on strike over pay
Workers at Pescanova fish factory in Lüderitz, Namibia, went out on strike on December 9, after pay negotiations failed to produce an agreement.
In previous years, there have been several strikes and other disputes at the factory. Last year, a strike over pay and the company’s failure to honor an agreement to make temporary workers permanent was narrowly averted.
Nigerian doctors on strike
Civil service doctors in Anambra State, Nigeria, have been on strike for two months. The dispute is over an unpaid 22 percent salary increase, which has been approved for doctors nationwide. Another cause of anger is the gulf that has opened up between their terms of employment and those of the specialist doctors.
Doctors employed within local government, where they are designated medial officers of health, and hospital consultants are continuing to work.
The all-out indefinite strike of Nigerian judiciary staff, which began on December 1, continues to paralyze the law courts. In Abakaliki, Ebonyi State, the gates of the High Court have been locked, and in other areas of the country, gates leading to judicial complexes have been barricaded.
A representative of the Judicial Staff Union of Nigeria told the press that the action, which is over pay and conditions, would last until the government calls the union back to the negotiating table.
United States - Oregon truckers protest termination of retiree benefits
Truckers rallied outside Oak Harbor Freight Lines in Portland, Oregon, last Thursday to protest the company's abrupt decision to strip retirees of health care benefits. The termination of retiree benefits is the company's latest maneuver during a strike involving about 600 truckers from Oregon, Washington, and Idaho that is now in its 12th week.
Bob Anderson, a 14-year driver at the Portland terminal, stated, "We believe our retirees have upheld their part of the bargain, and now the company is abandoning them. The retirees are the people who built Oak Harbor Freight. It seems as if the company is done with them now and wants to get rid of them."
Retiree Marv Deegan added, "What the company has done to us is making it difficult to eat. When you are on a fixed income and you have to pay a huge amount just to keep your health care, there is hardly enough money left for food."
ECO BRIEFS - 14 & 15.12.2008
ECONOMIC BRIEFS – 14 & 15.12.08
* * * * *
United Bank to lower lending rates for SMEs (BL 15.12.08)
With a view to extending a helping hand to the small and medium enterprises (SME) segment and arresting the build-up of non-performing assets, Kolkata-headquartered United Bank of India has announced a restructuring plan for the segment. Mr Satish C. Gupta, Chairman and Managing Director, said the restructuring initiatives would include lowering of interest rates for the SME and MSME segments.
Indian Bank to decide on new recruitments soon (BL 15.12.08)
Indian Bank expects to take a decision on fresh recruitments and the number of vacancies in about a week to 10 days’ time. Mr M.S. Sundara Rajan, CMD, Indian Bank, said “We do a total business of Rs 1.12 lakh crore and have adequate employees and can manage with the current 20,400.” “With the bank planning to open branches in Madhya Pradesh and elsewhere, we expect to go for fresh recruitments,” he said.
South Indian Bank expanding in North (BL 15.12.08)
South Indian Bank has decided to expand its footprint across the country by opening 40 new branches over the next 12 months. Also, SIB plans to recruit about 500 people in the remaining months of this financial year. This would take the headcount to 4,900 by end March 2009. “We had, last week, received RBI licence to open 40 new branches. These would come up by end December next year. Out of the proposed 40 new branches, we will have 11 in the Delhi region,” Dr V.A. Joseph, Managing Director & Chief Executive Officer, said. Dr Joseph said that SIB, which currently has 520 branches, of which 30 are in the National Capital Region, wants to have a national presence with special focus on the North and Eastern India. Currently, its entire branch network is core-banking solutions (CBS) enabled. He also said that the bank was well on course to add 7 lakh new customers this financial year.
Downturn has not dampened use of plastic money’ (BL 15.12.08)
Transaction processing and knowledge management company Venture Infotek believes that the downturn has not dampened the use of plastic money across the country. Its Vice-Chairman and Managing Director, Mr Piyush Khaitan, pointed to a 55 per cent growth in the number of card transactions during October this year compared with the corresponding period of the earlier year and value wise it had shot up by around 69 per cent, indicating an increased spend through plastic money. The company’s analysis has been based on the data of 14 banks to whom it offers end-to-end acquiring managed services. In October, the transaction volumes increased by 25 per cent and the value by 35 per cent compared with September.
Slew of sops await home loan takers (BL 15.12.08)
The much-awaited details of the incentives for home loan borrowers up to Rs 20 lakh are likely to be made public on Monday. This follows a meeting of bankers with the Finance Ministry officials held in Delhi last week, where a consensus was reached among PSBs to disburse home loans up to Rs 20 lakh at lower rates. In the meeting, the bankers are understood to have received an assurance from the policy makers to relax norms related to risk weights and margin requirements for home loans, which would enable banks to lend more in these categories.
SC rule on cheque bounce cases (BL 15.12.08)
The Supreme Court has held that only a lower court in whose jurisdiction an offence of cheque bounce is committed will try the case. The apex court said complainants, including financial institutions and banks, while filing cheque bounce cases, should ensure that no inconvenience is cased to the accused. There are numerous instances where complaints are being filed at more than one place to harass an accused.
Output of worry (BL 15.12.08)
When the quick estimates of industrial production for August were released, Mr P. Chidambaram, then Finance Minister, doubted the extent of the slippage. From 7.4 per cent the previous month, industrial output growth had shrunk to just 1.3 per cent. Now, as if to confirm that August was not a freak month, the data for October show a decline of 0.4 per cent in industrial output. Manufacturing fell off the edge, declining by 1.2 per cent for the first time in 15 years. While other central banks and governments, realistic about the depth of their economies’ fall, are thinking big, Indian policymakers are still tinkering with low-level stimuli. Why focus on reductions in rates for home loans up to Rs 20 lakh when a good part of the market is driven by higher value housing. How will prioritising easier loans for SMEs help them when they are dependent on orders from the large companies that are at present in no mood to expand their investments or output?
Welcome moves but room for more (BL 15.12.08)
Experts are likely to feel that the fiscal stimulus package errs on the side of caution. The Government should not hesitate to introduce a further fillip to the economy through additional contra-cyclical spending, if necessary.
'Insurance preferred over FDs' (BL 15.12.08)
Government securities may be seen as safe investments the world over in these times of turmoil but the findings of a survey say that more number of people in India think insurance is a better option than fixed deposits. At the same time, the survey, conducted by the global research firm Nielson, said all-weather investment option gold continues to be the safest bet for most of the respondents. As many as 58 per cent of the surveyed people prefer gold as safe investment, followed by 54 per cent respondents for insurance and 34 per cent for fixed deposits.
RBI sells $20.6 b in Oct (BL, BS 15.12.08)
The Reserve Bank of India sold $20.6 billion in October. It was during October that the local currency faced severe pressure. The currency declined from about 47 to the dollar at the beginning of the month to a little over 50 at the end of October. The super spike in oil prices on the one hand and flight of capital on the other have been the two factors that saw the RBI furiously sell off dollars to prop up the rupee, according to Dr D.K. Joshi, Director and Principal Economist at rating agency Crisil. The RBI has so far in this fiscal sold close to $34 billion while purchasing $5.68 billion. The net sale of $28.3 billion would mean that an equivalent amount of Rs 1,20,000 crore has been removed from the banking system - causing some liquidity crunch before the announcement of recent liquidity infusing measures. During 2006-07 the RBI did not sell any dollars in the market. In 2007-08 also the RBI remained a purchaser of dollars - except in March, when it sold about $1.4 billion. During these two years alone, the RBI had purchased about $100 billion – which got added to the country’s forex reserves.
Yields continue to head south as inflation abates, oil prices fall (BL 15.12.08)
Bond yields maintained their south bound trajectory, fuelled by abating inflationary pressures and weak global oil prices. There was sustained buying of government securities on expectations of more policy interventions from the Reserve Bank of India. The anticipation came amidst mounting fears of a deceleration in the GDP growth. Last week, the RBI Governor, Dr D. Subbarao, had, in fact, expressed such fears, indicating growth projections were likely to face a downward revision from the targeted 7.5-8 per cent for the current year. Besides, foreign institutional investors-led inflows during the week were about $250 million. Along with these flows, exporters also began remittances after receiving their delayed payments. In addition, inflow of non-resident deposits into public sector banks remained high. The comfortable liquidity situation was evident from the weekend liquidity adjustment facility auctions. At the weekly LAF auctions, the recourse to the reverse repurchase window was Rs 24,035 crore. At the 91 day T-bill auctions, the cut-off yield dropped 5.65 per cent, down from the previous week’s 6.58 per cent. Rush for securities pulled down the ten-year yield to maturity (YTM) last weekend to 6.17 per cent on a weighted average basis, from the previous weekend’s level of 6.89 per cent. This is the lowest level since January 2003. All profits from sale of HTM category are to be treated as the capital reserve. Banks took advantage of this opportunity, since other forms of raising tier-I capital - equity or through perpetual bonds - were still difficult given the current market conditions. Pause in the yield softening is likely, as banks book profits at current levels. Further accretions are expected to take place after deposit rates are brought down. One year CDs are below 8.5 per cent and still falling. This rate is at least 200 basis points below the one year retail deposits, clearly implying that there is little interest in bulk funds for the moment. Retail deposit rates could follow suit in the coming weeks, along with lending rates.
25 US banks go bust so far this year (BL 15.12.08)
Reeling under a recession that's getting worse, the US has seen the collapse of 25 banks this year, with two entities going belly up on average each month. The world's largest economy, which officially entered a recession phase in December last year, has seen the demise of three banks this month.
US household borrowings shrink in July-Sept (BL 15.12.08)
Data from the Federal Reserve’s latest Flow of Funds Accounts, released on December 11, shows that net borrowings by US households during July-September contracted by $117.4 billion. The previous two quarters had seen substantial credit slowdowns - households borrowed only $77.1 billion in April-June 2008, against $949.2 billion and $1,397.5 billion during the same quarter of the preceding two years. Reduced spending by US consumers could hit Indian exports hard - especially in sectors such as textiles, leather goods, handicrafts and auto-components.
PNB targets Rs 4,000 cr from state (BS 15.12.08)
The Orissa circle of Punjab National Bank (PNB) expects to achieve a total business volume of Rs 4,000 crore by the end of March next year, up from the existing figure of Rs 3,200 crore. BP Sharma, head of PNB’s Orissa circle said, “PNB’s business volume for the Orissa circle has jumped from Rs 1,228 crore to Rs 3,200 crore over the past two years, thereby clocking a growth of about 146 per cent. We expect to achieve our targeted business volume of Rs 4,000 crore by March next year.” “The priority of public sector banks in the country is to boost advances in the agricultural sector as it is in the interest of the nation’s economy” he added.
KVG Bank to have core banking (BS 15.12.08)
Karnataka Vikas Grameena (KVG) Bank, the regional rural bank covering Dharwad, Haveri, Gadag, Belgaum, Bijapur, Bagalkot, Udupi, Dakshina Kannada and Uttara Kannada districts, will soon bring its urban and semi-urban branches under the core banking System. KVGB chairman M Dhananjaya, speaking at a customer meet arranged by eight branches of the Dharwad-headquartered bank, said the bank had total business of Rs 5,550 crore and a customer base of about 33 lakh.
Dewan Hsg to dilute 15% for Rs 200 cr (BS 15.12.08)
Dewan Housing Finance (DHFL), a housing finance company, said it is planning to dilute 15 per cent equity to raise close to Rs 200 crore by the end of this financial year. “We will be raising Rs 150-200 crore through around 15 per cent equity dilution by March 2009. We are exploring all options, including a rights issue,” said DHFL Vice-chairman and MD Kapil Wadhawan. Though banks emerged as their principal source of funds, with interest rate hovering around 13-14 per cent many HFCs are looking for alternate source of funds.
Only new buyers to get home loan sops (ET 15.12.08)
Existing home loan borrowers will not benefit from the special home loan schemes to be introduced by state-owned banks as a part of the government’s stimulus package. The scheme, with cheap rates on home loans, will apply only to fresh purchases and not for refinancing. The scheme is likely to be formally announced by the Indian Bank Association (IBA) on Monday. Under the special package, loans up to Rs 5 lakh will be priced at 8.50% while loans between Rs 5-20 lakh will attract interest rates of 9.25%. At present, the lowest rates applicable to home loans are above 10%. Other features of the special package include free loan insurance cover, waiver of pre-payment penalty and lower margins.
I-banks’ income melts in ’08 (ET 15.12.08)
As slowdown-hit companies put a break on investment and fund raising, investment banks face a sharp drop in their fee-based income. This income, earned from providing various deal-related services, dropped 36.3% in the first eleven months of the 2008 calendar year, according to data compiled by a leading business information provider. The drop has been a sharper 82% in the case of fee earned from helping companies raise equity. Fee from managing the debt market-related activities also came down 19.7%. Almost all major players such as Goldman Sachs, Citi, Nomura, Deutsche Bank, ICICI Bank and Kotak Mahindra reported a decline in their I-banking fee volumes.
Global biggies vie for 26% in UTI AMC (ET 15.12.08)
UTI Asset Management Company (AMC), the oldest fund house in the country, is in advanced talks with top global players for offering a 26% strategic stake. The AMC is understood to have shortlisted 4 international players. The names under consideration are the US firm T Rowe Price, Shinsei Bank of Japan and two European firms. According to plans approved by the finance ministry, the four sponsors of UTI AMC - the State Bank of India (SBI), Life Insurance Corporation of India (LIC), Bank of Baroda and Punjab National Bank - would offload part of their holdings to the strategic partner. These four state-owned entities currently hold 25% each in the asset management company.
Fed Reserve likely to cut interest rates (ET 15.12.08)
The Federal Reserve is expected to cut interest rates to a record low after it concludes a two-day policy-setting meeting on Tuesday. Twelve of 16 US primary dealers polled by Reuters expect the Fed to cut the key federal funds rate by 50 basis points, which would bring it down to an unprecedented 0.5%. Others predict a bigger cut. Global interest rates are converging to historic lows as major central banks slash interest rates to battle recession.
Geneva Banks lost upto $4 b to Madoff (ET 15.12.08)
Geneva-based banks and investment funds have lost more than 5 billion Swiss francs ($4.22 billion) in the alleged $50-billion fraud by former Nasdaq chairman Bernard Madoff, Swiss newspaper Le Temps reported on Saturday.
PNB ready to give auto credit sans dealers’ cut (FE 15.12.08)
Punjab National Bank on Sunday said it is open to provide credit in case auto players come clean and do not demand commission for their dealers. “These auto manufacturers have told me, you have to give dealers’ commission. I can’t do that,” PNB chairman and managing director KC Chakrabarty said when asked why the public sector banks are reluctant to do auto financing. Referring to credit squeeze into blessing in disguise for public sector banks, Chakrabarty said those who never wanted to deal with PSU banks are coming in.
Cheaper home loans may not cheer realty sector (FE 15.12.08)
The real estate sector is unlikely to see any movement even after measures like bringing Rs 20 lakh and below loans under the priority sector. However, it will trigger demand in the tier II and tier III cities.
India Inc rediscovers FDs & asset mortgage (FE 15.12.08)
The liquidity crisis has top Indian companies going back to the good old ways of raising fund-taking fixed deposits and pledging shares. Apparently, companies have realised that those who garner funds at the best rates are the ones with the best chance to survive. With the equity market virtually shut for new issues and banks reluctant to lend to the corporate sector, companies have little option but to turn to debt placement. “The cost of funds for any decent company would be around 14 to 18% now while fixed deposits can be raised for around 12.5%. So they are attractive,” says Mandar Gupte, CFO with a multinational company. For investors, too, the fixed deposit route makes sense as the returns are more than that what are available from banks, which offer at best around 10%.
Systematic investment in bank deposits (BL 14.12.08)
Union Bank of India has recently launched a recurring deposit that allows investors to enjoy the returns of a term deposit while allowing flexibility to invest varying sums into the account every month. Union Monthly Plus is a recurring deposit scheme offered for individuals, institutions, corporates, partnership, trusts and HUFs. Investors can put in an initial amount and add to it by way of instalments made every month. Investors can vary the term of the investment for any period between 6 and 60 months (in multiples of one month). This deposit scheme requires investors to choose a minimum core amount (initial investment) that can vary from Rs 100 to Rs 1,00,000 and deposit it initially. Investors may have to choose the core amount conservatively, as the subsequent instalments cannot fall short of this amount. Future instalments can, however, be hiked up to 10 times the core amount. There would be no penalty for delayed payment of instalment or failure to pay instalment in a given month. The recurring deposit would enjoy returns similar to the prevailing term deposit interest rates offered by Union Bank. The interest rate for a five-year term deposit is 9.5 per cent. Interest rates are credited on a quarterly basis and would be compounded and received at the end of the deposit term. However, for the purpose of calculation of interest, the bank would consider only the minimum balance between the 10th and last day of a given month. Thus, any instalment for a given month would earn interest only if it is deposited before the 10th of the month. Investors can also avail a loan against the deposit for up to 25 per cent of the deposit amount at 2 per cent over the deposit rate.
Bank interest rates to drop in the next 2-3 weeks: Kamath (BL, ET, FE 14.12.08)
Interest rates in the banking sector are set to drop in the next 2-3 weeks. This would help borrowers taking loans for homes, auto, and education among others. Indicating this, Mr K.V. Kamath, Managing Director and Chief Executive Officer of ICICI Bank, said, “the rate cut this time would be steeper, as I foresee inflation expectation rate to be below five per cent”. During the last two weeks, the rate on 10-year Government bonds moved down by 1.5 per cent. “We need to keep that in view, as that would set in motion the deposit and lending rates.”
Interest rate risk stares in the face of NBFCs (BL 14.12.08)
Will interest rates rise or fall? The answer to this question is crucial for the NBFCs, because most of them raise funds on floating rates of interest, while lend them at fixed rates. “Interest rate risk is staring at our faces. We are confused about interest rates,” says Mr R. Sridhar, Managing Director, Shriram Transport Finance Company. Mr T.T. Srinivasa Raghavan, Managing Director, Sundaram Finance, expresses a slightly different view. According to him, those companies that are predominantly dependent upon bank funding - which is at floating rates of interest - only will face this problem. Others, who raise funds from multiple sources such as public deposits and securitisation, are not likely to face interest rate risk.
Fixed return to beat slump (BL 14.12.08)
With equity markets declining, insurance companies may clock slower growth rates. Until the beginning of 2008, the insurance industry as a whole was growing at 30-40 per cent over the last few years; some private insurers even achieved triple digit growth. Strong rally in equity markets over this period led to unit-linked insurance plan (ULIP) emerging as the most popular insurance product, accounting for 70-80 per cent of the new premium income. Now with the stock markets well into a protracted downturn, insurance companies have changed their strategies to stay afloat. Further, with interest rates peaking out, insurance companies are betting on debt products to lock-in funds into fixed returns.
Developers want more from stimulus package (BL 14.12.08)
Over the last fortnight the Government and the RBI announced several measures to soothe the troubled real-estate sector and cool soaring interest rates. However, real-estate companies feel the steps are inadequate to pull the sector out of the sales slump and financial crunch. But the larger challenge is that the demand for housing is not reflected in the order book, as consumers anticipate that residential prices may fall further. This `inaccurate belief’ is hurting sales, says , Mr Kumar Gera, Chairman, CREDAI. Industry watchers believe that interest rates on housing loans need to come down to 7-8 per cent and loans up to Rs 35 lakh classified as priority sector. A Rs 20 lakh loan means a ticket size of Rs 25 lakh, and that kind of residential pricing is only possible in smaller cities, not in metros and Tier I cities, says Mr Pradeep Jain, Chairman, Parsvnath. The ideal interest rate for loans up to Rs 5 lakh should be below 5 per cent, whereas for loans up to Rs 35 lakh it should be pegged at below 7 per cent and above Rs 35 lakh should be below 9 per cent, feels Mr Jain.
****
Source BL= Business Line, BS=Business Standard, ET=Economic Times & FE=Financial Express
* * * * *
United Bank to lower lending rates for SMEs (BL 15.12.08)
With a view to extending a helping hand to the small and medium enterprises (SME) segment and arresting the build-up of non-performing assets, Kolkata-headquartered United Bank of India has announced a restructuring plan for the segment. Mr Satish C. Gupta, Chairman and Managing Director, said the restructuring initiatives would include lowering of interest rates for the SME and MSME segments.
Indian Bank to decide on new recruitments soon (BL 15.12.08)
Indian Bank expects to take a decision on fresh recruitments and the number of vacancies in about a week to 10 days’ time. Mr M.S. Sundara Rajan, CMD, Indian Bank, said “We do a total business of Rs 1.12 lakh crore and have adequate employees and can manage with the current 20,400.” “With the bank planning to open branches in Madhya Pradesh and elsewhere, we expect to go for fresh recruitments,” he said.
South Indian Bank expanding in North (BL 15.12.08)
South Indian Bank has decided to expand its footprint across the country by opening 40 new branches over the next 12 months. Also, SIB plans to recruit about 500 people in the remaining months of this financial year. This would take the headcount to 4,900 by end March 2009. “We had, last week, received RBI licence to open 40 new branches. These would come up by end December next year. Out of the proposed 40 new branches, we will have 11 in the Delhi region,” Dr V.A. Joseph, Managing Director & Chief Executive Officer, said. Dr Joseph said that SIB, which currently has 520 branches, of which 30 are in the National Capital Region, wants to have a national presence with special focus on the North and Eastern India. Currently, its entire branch network is core-banking solutions (CBS) enabled. He also said that the bank was well on course to add 7 lakh new customers this financial year.
Downturn has not dampened use of plastic money’ (BL 15.12.08)
Transaction processing and knowledge management company Venture Infotek believes that the downturn has not dampened the use of plastic money across the country. Its Vice-Chairman and Managing Director, Mr Piyush Khaitan, pointed to a 55 per cent growth in the number of card transactions during October this year compared with the corresponding period of the earlier year and value wise it had shot up by around 69 per cent, indicating an increased spend through plastic money. The company’s analysis has been based on the data of 14 banks to whom it offers end-to-end acquiring managed services. In October, the transaction volumes increased by 25 per cent and the value by 35 per cent compared with September.
Slew of sops await home loan takers (BL 15.12.08)
The much-awaited details of the incentives for home loan borrowers up to Rs 20 lakh are likely to be made public on Monday. This follows a meeting of bankers with the Finance Ministry officials held in Delhi last week, where a consensus was reached among PSBs to disburse home loans up to Rs 20 lakh at lower rates. In the meeting, the bankers are understood to have received an assurance from the policy makers to relax norms related to risk weights and margin requirements for home loans, which would enable banks to lend more in these categories.
SC rule on cheque bounce cases (BL 15.12.08)
The Supreme Court has held that only a lower court in whose jurisdiction an offence of cheque bounce is committed will try the case. The apex court said complainants, including financial institutions and banks, while filing cheque bounce cases, should ensure that no inconvenience is cased to the accused. There are numerous instances where complaints are being filed at more than one place to harass an accused.
Output of worry (BL 15.12.08)
When the quick estimates of industrial production for August were released, Mr P. Chidambaram, then Finance Minister, doubted the extent of the slippage. From 7.4 per cent the previous month, industrial output growth had shrunk to just 1.3 per cent. Now, as if to confirm that August was not a freak month, the data for October show a decline of 0.4 per cent in industrial output. Manufacturing fell off the edge, declining by 1.2 per cent for the first time in 15 years. While other central banks and governments, realistic about the depth of their economies’ fall, are thinking big, Indian policymakers are still tinkering with low-level stimuli. Why focus on reductions in rates for home loans up to Rs 20 lakh when a good part of the market is driven by higher value housing. How will prioritising easier loans for SMEs help them when they are dependent on orders from the large companies that are at present in no mood to expand their investments or output?
Welcome moves but room for more (BL 15.12.08)
Experts are likely to feel that the fiscal stimulus package errs on the side of caution. The Government should not hesitate to introduce a further fillip to the economy through additional contra-cyclical spending, if necessary.
'Insurance preferred over FDs' (BL 15.12.08)
Government securities may be seen as safe investments the world over in these times of turmoil but the findings of a survey say that more number of people in India think insurance is a better option than fixed deposits. At the same time, the survey, conducted by the global research firm Nielson, said all-weather investment option gold continues to be the safest bet for most of the respondents. As many as 58 per cent of the surveyed people prefer gold as safe investment, followed by 54 per cent respondents for insurance and 34 per cent for fixed deposits.
RBI sells $20.6 b in Oct (BL, BS 15.12.08)
The Reserve Bank of India sold $20.6 billion in October. It was during October that the local currency faced severe pressure. The currency declined from about 47 to the dollar at the beginning of the month to a little over 50 at the end of October. The super spike in oil prices on the one hand and flight of capital on the other have been the two factors that saw the RBI furiously sell off dollars to prop up the rupee, according to Dr D.K. Joshi, Director and Principal Economist at rating agency Crisil. The RBI has so far in this fiscal sold close to $34 billion while purchasing $5.68 billion. The net sale of $28.3 billion would mean that an equivalent amount of Rs 1,20,000 crore has been removed from the banking system - causing some liquidity crunch before the announcement of recent liquidity infusing measures. During 2006-07 the RBI did not sell any dollars in the market. In 2007-08 also the RBI remained a purchaser of dollars - except in March, when it sold about $1.4 billion. During these two years alone, the RBI had purchased about $100 billion – which got added to the country’s forex reserves.
Yields continue to head south as inflation abates, oil prices fall (BL 15.12.08)
Bond yields maintained their south bound trajectory, fuelled by abating inflationary pressures and weak global oil prices. There was sustained buying of government securities on expectations of more policy interventions from the Reserve Bank of India. The anticipation came amidst mounting fears of a deceleration in the GDP growth. Last week, the RBI Governor, Dr D. Subbarao, had, in fact, expressed such fears, indicating growth projections were likely to face a downward revision from the targeted 7.5-8 per cent for the current year. Besides, foreign institutional investors-led inflows during the week were about $250 million. Along with these flows, exporters also began remittances after receiving their delayed payments. In addition, inflow of non-resident deposits into public sector banks remained high. The comfortable liquidity situation was evident from the weekend liquidity adjustment facility auctions. At the weekly LAF auctions, the recourse to the reverse repurchase window was Rs 24,035 crore. At the 91 day T-bill auctions, the cut-off yield dropped 5.65 per cent, down from the previous week’s 6.58 per cent. Rush for securities pulled down the ten-year yield to maturity (YTM) last weekend to 6.17 per cent on a weighted average basis, from the previous weekend’s level of 6.89 per cent. This is the lowest level since January 2003. All profits from sale of HTM category are to be treated as the capital reserve. Banks took advantage of this opportunity, since other forms of raising tier-I capital - equity or through perpetual bonds - were still difficult given the current market conditions. Pause in the yield softening is likely, as banks book profits at current levels. Further accretions are expected to take place after deposit rates are brought down. One year CDs are below 8.5 per cent and still falling. This rate is at least 200 basis points below the one year retail deposits, clearly implying that there is little interest in bulk funds for the moment. Retail deposit rates could follow suit in the coming weeks, along with lending rates.
25 US banks go bust so far this year (BL 15.12.08)
Reeling under a recession that's getting worse, the US has seen the collapse of 25 banks this year, with two entities going belly up on average each month. The world's largest economy, which officially entered a recession phase in December last year, has seen the demise of three banks this month.
US household borrowings shrink in July-Sept (BL 15.12.08)
Data from the Federal Reserve’s latest Flow of Funds Accounts, released on December 11, shows that net borrowings by US households during July-September contracted by $117.4 billion. The previous two quarters had seen substantial credit slowdowns - households borrowed only $77.1 billion in April-June 2008, against $949.2 billion and $1,397.5 billion during the same quarter of the preceding two years. Reduced spending by US consumers could hit Indian exports hard - especially in sectors such as textiles, leather goods, handicrafts and auto-components.
PNB targets Rs 4,000 cr from state (BS 15.12.08)
The Orissa circle of Punjab National Bank (PNB) expects to achieve a total business volume of Rs 4,000 crore by the end of March next year, up from the existing figure of Rs 3,200 crore. BP Sharma, head of PNB’s Orissa circle said, “PNB’s business volume for the Orissa circle has jumped from Rs 1,228 crore to Rs 3,200 crore over the past two years, thereby clocking a growth of about 146 per cent. We expect to achieve our targeted business volume of Rs 4,000 crore by March next year.” “The priority of public sector banks in the country is to boost advances in the agricultural sector as it is in the interest of the nation’s economy” he added.
KVG Bank to have core banking (BS 15.12.08)
Karnataka Vikas Grameena (KVG) Bank, the regional rural bank covering Dharwad, Haveri, Gadag, Belgaum, Bijapur, Bagalkot, Udupi, Dakshina Kannada and Uttara Kannada districts, will soon bring its urban and semi-urban branches under the core banking System. KVGB chairman M Dhananjaya, speaking at a customer meet arranged by eight branches of the Dharwad-headquartered bank, said the bank had total business of Rs 5,550 crore and a customer base of about 33 lakh.
Dewan Hsg to dilute 15% for Rs 200 cr (BS 15.12.08)
Dewan Housing Finance (DHFL), a housing finance company, said it is planning to dilute 15 per cent equity to raise close to Rs 200 crore by the end of this financial year. “We will be raising Rs 150-200 crore through around 15 per cent equity dilution by March 2009. We are exploring all options, including a rights issue,” said DHFL Vice-chairman and MD Kapil Wadhawan. Though banks emerged as their principal source of funds, with interest rate hovering around 13-14 per cent many HFCs are looking for alternate source of funds.
Only new buyers to get home loan sops (ET 15.12.08)
Existing home loan borrowers will not benefit from the special home loan schemes to be introduced by state-owned banks as a part of the government’s stimulus package. The scheme, with cheap rates on home loans, will apply only to fresh purchases and not for refinancing. The scheme is likely to be formally announced by the Indian Bank Association (IBA) on Monday. Under the special package, loans up to Rs 5 lakh will be priced at 8.50% while loans between Rs 5-20 lakh will attract interest rates of 9.25%. At present, the lowest rates applicable to home loans are above 10%. Other features of the special package include free loan insurance cover, waiver of pre-payment penalty and lower margins.
I-banks’ income melts in ’08 (ET 15.12.08)
As slowdown-hit companies put a break on investment and fund raising, investment banks face a sharp drop in their fee-based income. This income, earned from providing various deal-related services, dropped 36.3% in the first eleven months of the 2008 calendar year, according to data compiled by a leading business information provider. The drop has been a sharper 82% in the case of fee earned from helping companies raise equity. Fee from managing the debt market-related activities also came down 19.7%. Almost all major players such as Goldman Sachs, Citi, Nomura, Deutsche Bank, ICICI Bank and Kotak Mahindra reported a decline in their I-banking fee volumes.
Global biggies vie for 26% in UTI AMC (ET 15.12.08)
UTI Asset Management Company (AMC), the oldest fund house in the country, is in advanced talks with top global players for offering a 26% strategic stake. The AMC is understood to have shortlisted 4 international players. The names under consideration are the US firm T Rowe Price, Shinsei Bank of Japan and two European firms. According to plans approved by the finance ministry, the four sponsors of UTI AMC - the State Bank of India (SBI), Life Insurance Corporation of India (LIC), Bank of Baroda and Punjab National Bank - would offload part of their holdings to the strategic partner. These four state-owned entities currently hold 25% each in the asset management company.
Fed Reserve likely to cut interest rates (ET 15.12.08)
The Federal Reserve is expected to cut interest rates to a record low after it concludes a two-day policy-setting meeting on Tuesday. Twelve of 16 US primary dealers polled by Reuters expect the Fed to cut the key federal funds rate by 50 basis points, which would bring it down to an unprecedented 0.5%. Others predict a bigger cut. Global interest rates are converging to historic lows as major central banks slash interest rates to battle recession.
Geneva Banks lost upto $4 b to Madoff (ET 15.12.08)
Geneva-based banks and investment funds have lost more than 5 billion Swiss francs ($4.22 billion) in the alleged $50-billion fraud by former Nasdaq chairman Bernard Madoff, Swiss newspaper Le Temps reported on Saturday.
PNB ready to give auto credit sans dealers’ cut (FE 15.12.08)
Punjab National Bank on Sunday said it is open to provide credit in case auto players come clean and do not demand commission for their dealers. “These auto manufacturers have told me, you have to give dealers’ commission. I can’t do that,” PNB chairman and managing director KC Chakrabarty said when asked why the public sector banks are reluctant to do auto financing. Referring to credit squeeze into blessing in disguise for public sector banks, Chakrabarty said those who never wanted to deal with PSU banks are coming in.
Cheaper home loans may not cheer realty sector (FE 15.12.08)
The real estate sector is unlikely to see any movement even after measures like bringing Rs 20 lakh and below loans under the priority sector. However, it will trigger demand in the tier II and tier III cities.
India Inc rediscovers FDs & asset mortgage (FE 15.12.08)
The liquidity crisis has top Indian companies going back to the good old ways of raising fund-taking fixed deposits and pledging shares. Apparently, companies have realised that those who garner funds at the best rates are the ones with the best chance to survive. With the equity market virtually shut for new issues and banks reluctant to lend to the corporate sector, companies have little option but to turn to debt placement. “The cost of funds for any decent company would be around 14 to 18% now while fixed deposits can be raised for around 12.5%. So they are attractive,” says Mandar Gupte, CFO with a multinational company. For investors, too, the fixed deposit route makes sense as the returns are more than that what are available from banks, which offer at best around 10%.
Systematic investment in bank deposits (BL 14.12.08)
Union Bank of India has recently launched a recurring deposit that allows investors to enjoy the returns of a term deposit while allowing flexibility to invest varying sums into the account every month. Union Monthly Plus is a recurring deposit scheme offered for individuals, institutions, corporates, partnership, trusts and HUFs. Investors can put in an initial amount and add to it by way of instalments made every month. Investors can vary the term of the investment for any period between 6 and 60 months (in multiples of one month). This deposit scheme requires investors to choose a minimum core amount (initial investment) that can vary from Rs 100 to Rs 1,00,000 and deposit it initially. Investors may have to choose the core amount conservatively, as the subsequent instalments cannot fall short of this amount. Future instalments can, however, be hiked up to 10 times the core amount. There would be no penalty for delayed payment of instalment or failure to pay instalment in a given month. The recurring deposit would enjoy returns similar to the prevailing term deposit interest rates offered by Union Bank. The interest rate for a five-year term deposit is 9.5 per cent. Interest rates are credited on a quarterly basis and would be compounded and received at the end of the deposit term. However, for the purpose of calculation of interest, the bank would consider only the minimum balance between the 10th and last day of a given month. Thus, any instalment for a given month would earn interest only if it is deposited before the 10th of the month. Investors can also avail a loan against the deposit for up to 25 per cent of the deposit amount at 2 per cent over the deposit rate.
Bank interest rates to drop in the next 2-3 weeks: Kamath (BL, ET, FE 14.12.08)
Interest rates in the banking sector are set to drop in the next 2-3 weeks. This would help borrowers taking loans for homes, auto, and education among others. Indicating this, Mr K.V. Kamath, Managing Director and Chief Executive Officer of ICICI Bank, said, “the rate cut this time would be steeper, as I foresee inflation expectation rate to be below five per cent”. During the last two weeks, the rate on 10-year Government bonds moved down by 1.5 per cent. “We need to keep that in view, as that would set in motion the deposit and lending rates.”
Interest rate risk stares in the face of NBFCs (BL 14.12.08)
Will interest rates rise or fall? The answer to this question is crucial for the NBFCs, because most of them raise funds on floating rates of interest, while lend them at fixed rates. “Interest rate risk is staring at our faces. We are confused about interest rates,” says Mr R. Sridhar, Managing Director, Shriram Transport Finance Company. Mr T.T. Srinivasa Raghavan, Managing Director, Sundaram Finance, expresses a slightly different view. According to him, those companies that are predominantly dependent upon bank funding - which is at floating rates of interest - only will face this problem. Others, who raise funds from multiple sources such as public deposits and securitisation, are not likely to face interest rate risk.
Fixed return to beat slump (BL 14.12.08)
With equity markets declining, insurance companies may clock slower growth rates. Until the beginning of 2008, the insurance industry as a whole was growing at 30-40 per cent over the last few years; some private insurers even achieved triple digit growth. Strong rally in equity markets over this period led to unit-linked insurance plan (ULIP) emerging as the most popular insurance product, accounting for 70-80 per cent of the new premium income. Now with the stock markets well into a protracted downturn, insurance companies have changed their strategies to stay afloat. Further, with interest rates peaking out, insurance companies are betting on debt products to lock-in funds into fixed returns.
Developers want more from stimulus package (BL 14.12.08)
Over the last fortnight the Government and the RBI announced several measures to soothe the troubled real-estate sector and cool soaring interest rates. However, real-estate companies feel the steps are inadequate to pull the sector out of the sales slump and financial crunch. But the larger challenge is that the demand for housing is not reflected in the order book, as consumers anticipate that residential prices may fall further. This `inaccurate belief’ is hurting sales, says , Mr Kumar Gera, Chairman, CREDAI. Industry watchers believe that interest rates on housing loans need to come down to 7-8 per cent and loans up to Rs 35 lakh classified as priority sector. A Rs 20 lakh loan means a ticket size of Rs 25 lakh, and that kind of residential pricing is only possible in smaller cities, not in metros and Tier I cities, says Mr Pradeep Jain, Chairman, Parsvnath. The ideal interest rate for loans up to Rs 5 lakh should be below 5 per cent, whereas for loans up to Rs 35 lakh it should be pegged at below 7 per cent and above Rs 35 lakh should be below 9 per cent, feels Mr Jain.
****
Source BL= Business Line, BS=Business Standard, ET=Economic Times & FE=Financial Express
BANKING NEWS - AIBEA - 13.12.2008
Workers occupy auto parts plant in northern Germany
By Lucas Adler ,12 December 2008
On December 5, about 100 employees of the bankrupt auto parts supplier HWU occupied their factory in the small town of Hohenlockstedt, north of Hamburg. The workers are determined to defend their jobs and prevent the planned closure of the plant at the end of the year.
The workers’ union, IG Metall, is attempting to end the factory occupation following complaints from union bureaucrats at a major auto manufacturer that the action was threatening to disrupt production at that other firm.
HWU produces parts for catalytic converters, steering wheels and door locks. In June 2008, HWU was sold by its parent company, the Vollmann Group, to Horst Strodtkötter, a former employee at the factory. The workforce only learned of their new owner June 30, at a factory meeting that the new managing director did not attend.
Then six weeks ago, on October 29, Strodtkötter informed the workforce that HWU was bankrupt and unable to pay their wages in October. Strodtkötter declared that a 30 percent drop in orders resulting from the current crisis in the automotive industry had driven the company into bankruptcy.
The workers reacted at that time with a spontaneous 24-hour occupation of the premises. Their main concern was to prevent the removal of any parts or machinery that would make further production at the factory impossible. Following the declaration of a bankruptcy administrator that the company had sufficient orders, and that the outstanding wages could be paid out of insolvency funds (Insolvenzgeld--money paid by the government to workers at bankrupt firms, out of a levy on the owners), the employees returned to work.
Since then the workforce has been kept completely in the dark about any further developments. There was no further information on the future of the factory from either the managing director or the bankruptcy trustee. When it was announced last week that at the end of the year the insolvency funds would be exhausted, workers reoccupied the plant on Friday.
On Tuesday morning the factory council finally informed the workforce about the plan to close the plant. The majority of workers are to be made redundant by December 31. A skeleton staff of between 25 to 30 workers will be retained until the end of March to wind down the factory. The only hope for any retention of jobs, according to IG Metall, was via the creation of some sort of transfer company (a firm specializing in matching laid-off workers with new jobs).
The workers at the factory, however, place absolutely no confidence in such a transfer company. They are all convinced that the chances of finding alternative work in the present economic climate are almost zero. Many workers have been employed at the factory for over two decades and are ill-equipped to find new jobs at this stage of their lives and careers.
Hohenlockstedt is a small town of approximately 6,200 inhabitants in rural Schleswig-Holstein. At its peak, the factory was a thriving enterprise with up to 700 employees. Older inhabitants of the town recall when the factory operated three-shifts some 50 years ago. But such times are long past.
One worker with 37 years in the plant told a WSWS reporter how he had begun his apprenticeship there as a toolmaker and in recent years had worked predominantly in the production of spare parts. The situation for many workers is very bitter, he explained:
“Entire lives are at stake. There are many workers who began their working lives here, built a house and have small children. And then suddenly one day we were informed that everything is gone. After working here for over 35 years, I’m told that as of January 1, I can only inspect my workplace from the other side of the factory gate.”
An HWU employee who has worked as a toolmaker at the factory for 20 years stressed that the jobs situation in the region was very bad: “In the extreme case, you would have to move away from here to find new work. But under conditions where everybody has the same idea it will be difficult to find work.”
A somewhat younger worker, who started at the factory as an apprentice in 1988, pointed to the anger of the HWU employees—in particular because they had been informed about the factory’s plight at such a late stage. Workers are angry that all the skills and knowledge built up over decades of employment are now considered worthless and summarily being dismissed.
The WSWS also spoke with the chairman of the works council, Steffen Schmidt, and his deputy, Alfred Butt. When asked why IG Metall had done nothing to organise a more extensive campaign to defend the workers’ jobs, they responded by referring to disputes between the “works council princes” (union officials) active in the big car plants, who are intent on defending their own factories at the expense of all others and therefore make impossible any sort of broader solidarity between different plants and their workforces.
The perspective of IG Metall
The announcement of the closure of the facility was preceded by a series of measures aimed at reorganising the factory and which involved considerable sacrifices on the part of the workforce. The union enforced these measures by arguing that they were the only alternative to job cuts and HWU’s closing down. The result now is the complete closure of the plant. The perspective of ‘saving jobs’ by accepting wage cuts and other concessions failed catastrophically.
In 2002, IG Metall signed a contract with HWU involving a year-long reduction of the working week from 35 to 30 hours for its 225 employees with a 14 percent cut in wages. Just two years after the expiry of this contract, management announced the first bankruptcy of the factory in October 2005. The bankruptcy procedure at that time called for the shedding of 80 jobs.
IG Metall officials reacted by reaching a new contract, which abolished existing Christmas benefits and accepted other concessions. This contract ran until September 2007, when it was replaced by another involving further attacks on wages and working conditions, including the abolition of holiday pay. In return, workers were given a guarantee that their jobs would be safe until the end of 2009. This assurance has now been consigned to the waste bin following the latest declaration of bankruptcy.
The various concessions made by the trade union were incapable of saving a single job. Instead the workers were left unprepared for the planned closure of the factory. The union and the works council now regard the closure of the factory as inevitable. Their only concern is how best to negotiate the option of a possible transfer company.
IG Metall is trying to call off the occupation to ensure that the auto companies supplied by HWU receive the needed parts. The bureaucracy’s main concern is the smooth working of the German auto industry, not the fate of the HWU or any other workers.
HWU workers should establish contact with workers at these companies, independently of IG Metall, and organise a common struggle to defend jobs and production. The only future for auto workers lies in a fight for socialist policies and the nationalization of the industry under workers’ control.
In order to step up pressure on workers to return to work, managing director Strodtkötter posted a letter on the company bulletin board Tuesday afternoon threatening the immediate sacking of workers who refused to return to work. He also announced that striking workers would be forced to pay large sums to compensate for lost production.
The occupation of the HWU factory should be supported by all workers. It raises important political questions, which are relevant for workers at other companies. The most important of these questions is: who controls the productive forces and in whose interest should they be organised?
Workers Struggles:
Argentine bank employees to strike this week
Bank employees in Argentina last week rejected a 5 percent wage increase. Union leader Juan José Zanola called the offer a provocation. He also accused the banks of hiring goons to frighten bank employees into resigning. Over 1,500 employees have been forced to resign that way; a procedure that the union calls ‘disguised sackings.'
"In any case," he said, "we will strike on December 11 and 12, and we decided to add the 15th and 16th to continue to press for our wage demands." Contract negotiations are at a standstill, despite a government imposed cooling-off period and the intervention of a government mediator.
Argentine banks have been hit hard by the world financial crisis. This is now taking the form of capital flight. Over US $ 4 billion left the country in October. The total for the year is expected to top US $ 25 billion.
French ports workers strike
Port workers at the Fos-Lavera oil hub near Marseille have been on strike for a week, according to latest reports. Their action has blocked almost 50 ships, including 13 oil tankers and 22 oil product vessels, three chemical and seven gas tankers from entering France’s largest oil port.
The strike is in protest at the privatisation of the port complex. French unions and port employers signed an agreement in October, opening the way to privatise seven ports, including Fos-Lavera. The strategic port, with an annual oil traffic of 64.2 million tonnes, supplies crude to six refineries in southern and eastern France with an output capacity of 800,000 barrels per day (bpd). Crude from the terminal also supplies the 310,000-bpd Miro refinery in Germany and the 68,000-bpd Cressier refinery in Switzerland.
France’s petroleum industry body, UFIP, said that the dispute had cost the oil industry US$1.0-1.5 million a day and was forcing refiners to lower their output.
A Marseille port spokeswoman said that a final deal, which will see private companies take over unloading at the docks previously run by the state, needs to be approved by the end of January.
Mass demonstrations in Ireland to counter attacks on education
Between 40,000 and 70,000 people protested in Dublin on December 6 against spending cuts in education in what is believed to have been the largest demonstration in the capital since protests against the Iraq war. The protest formed part of a growing number of demonstrations against recent government policy announcements.
The demonstration was intended to highlight issues such as the increase in the pupil-teacher ratio, the removal of free book schemes and English support teachers, the condition of school buildings and the removal of grants for Traveller education.
Protesters carried numerous placards, including ones that read, “Schools Unite Against Cuts,” “Leave Our Kids Alone,” “Don’t Make Our Children Pay” and “28:1, Good Odds for a Horse, Not A Child.”
Teachers, parents and children marched from Parnell Square to Merrion Square as a series of nationwide protests against education cuts reached its climax. The march was organised jointly by the Association of Secondary Teachers (ASTI), the INTO and the Teachers’ Union of Ireland (TUI).
The unions claim that altogether 120,000 people have now marched against the school spending measures in the budget when previous demonstrations in Donegal, Cork, Galway and Tullamore are considered.
Tens of thousands of teachers, students and parents have held a series of protests against staff shortages and increased class sizes in recent months. The government recently gave in to one of the teachers’ demands and allocated additional funding to hire substitute teachers in secondary schools.
The government presented the 2009 budget in October, almost two months earlier than usual, to respond to a rising shortfall in tax revenues after Ireland slid into recession. This week, it said a further deterioration in public finances showed it would miss some targets set out in the 2009 budget. The government expects the 2009 budget deficit to reach 6.5 percent of gross domestic product, more than double the level allowed by European Union rules, despite cutting spending and raising several different taxes in October.
Irish childcare workers and parents protest
Hundreds of parents and childcare workers protested, December 11, in response to controversial government funding changes they believe could devastate the sector and lead to widespread creche closures, according to the Irish Independent.
The protests in Dublin and Cork are aimed at forcing a “re-think” on the Community Childcare Subvention Scheme (CCSS) that, critics claim, will generate both higher fees and the closure of smaller creches.
Childcare organiser at the union, SIPTU, Darrragh O’Connor said, “Up until recently, projects received a staffing grant that allowed them to set fees that took full account of the individual circumstances of each family. However, the introduction of the CCSS has seen this replaced by a rigid set of criteria that has seen fees rise dramatically for many low-wage families.”
In some cases, the impact on fees has been enormous—with some facilities increasing their charges for working parents by €113 a week. One parent, Michael Daly, of the Brooklodge Community Playschool, in Glanmire, Cork, said that the new government funding policies are making life impossible.
“There are roughly 40 children in the group—and it became very apparent last week that the playschool will be in a deficit of up to €4,000 and the parents will have to make-up the shortfall. And a lot of parents are finding it hard in the current economic climate,” he said.
Strike threats from UK postal workers
Postal workers in the Bridgwater area of Somerset have voted to strike over their working conditions, according to the BBC. Members of the Communication Workers Union (CWU) plan to walk out at Christmas in protest at their full-time jobs being replaced with part-time roles.
The dates of the strikes have yet to be announced.
Around 400 postal workers at the Bolton Mail Centre in Farnworth are to stage a 24-hour strike on December 19—one of the busiest mail days of the year—in protest at plans to close the centre.
The Stonehill Road depot is due to shut in 2010 as part of a Royal Mail cost-cutting exercise. In a ballot, CWU members at the depot voted by 77 percent in favour of the strike. Other Royal Mail centres at Stockport, Crewe and Liverpool will also be shut on the same day because of industrial action.
Rail workers on London Tube in second strike for pay parity
Rail workers responsible for finding structural faults and maintaining the electrical supply to London’s underground rail network began their second 36-hour strike December 7 after employer EDF Energy Powerlink refused to budge on their claim for pay parity with day workers.
Rail, Maritime and Transport union (RMT) General Secretary Bob Crow said, “Despite the overwhelming vote for action and an absolutely rock-solid strike in November, EDF Energy Powerlink has so far refused to acknowledge that shift testers should have pay-parity with their non-shift colleagues. Day-work staff rightly received a £3,000 increase for delivering flexibility, and their shift-working colleagues are simply seeking recognition of the flexibility they too have delivered, not least in accepting sweeping shift changes that have disrupted their work-life balance.”
Shift testers are responsible for finding and fixing faults at London Underground’s more than 250 power substations and maintaining the power supply. In ballots in October, RMT members voted by 21 to 2 for strike action and by 22 to 1 for action short of strikes. The first 36-hour strike by the 250 shift testers was held between November 16 and 18. Since November 16, they have made themselves unavailable for work after the end of any turns unless there is a direct and imminent danger to human life.
Demonstration by the Iraqi engineers in central Baghdad
Around 250 engineers took part in a sit-in, December 2, at Firdos Square in central Baghdad. The workers later on marched to the Ministry of Agriculture. Demonstrators demanded the restoration of professional allowances that were halted after April 9, 2003.
The protest was organised by the Union of Agricultural Engineers. Representatives of unions of teachers, veterinarians and health professionals also joined the protest. The president of the union announced that if its demands are not met by the Ministry of Agriculture, the union will call for a general strike in all the ministries across Iraq.
Striking Chevron oil workers injured by security forces in Nigeria
On December 3, striking workers at the Chevron plant in the Delta area of Nigeria set up a picket outside the plant. Vanguard reported that the strikers used more than 100 tankers to barricade the entrance to the plant and temporarily halted traffic along the NPA Expressway. The strikers were protesting the threatened sacking of 122 workers for indicating their interest in joining the National Union of Petroleum and Gas Workers (NUPENG).
According to Vanguard, “Anti-crime mobile, regular policemen and soldiers, who were drafted in to beef up security at the company, threw tear gas and used gun butts to beat members of the union in an orchestrated effort to break up their rank[s].”
Fifteen strikers were injured, and some of them had to be taken to hospital for treatment.
The local NUPENG chairperson, who was beaten by the security personnel, said, “We are here to tell Deltans [residents of the Niger Delta] and Nigerians of police and soldiers’ brutality on innocent Nigerians…. Today we are at Chevron’s gate right now to protest CNL management grand design to flush out NUPENG members in the company’s operations.” He claimed that Chevron gave the security operatives an order to shoot on sight.
Namibian fish factory workers on strike over pay
Workers at Pescanova fish factory in Lüderitz, Namibia, went out on strike on December 9, after pay negotiations failed to produce an agreement.
In previous years, there have been several strikes and other disputes at the factory. Last year, a strike over pay and the company’s failure to honor an agreement to make temporary workers permanent was narrowly averted.
Nigerian doctors on strike
Civil service doctors in Anambra State, Nigeria, have been on strike for two months. The dispute is over an unpaid 22 percent salary increase, which has been approved for doctors nationwide. Another cause of anger is the gulf that has opened up between their terms of employment and those of the specialist doctors.
Doctors employed within local government, where they are designated medial officers of health, and hospital consultants are continuing to work.
The all-out indefinite strike of Nigerian judiciary staff, which began on December 1, continues to paralyze the law courts. In Abakaliki, Ebonyi State, the gates of the High Court have been locked, and in other areas of the country, gates leading to judicial complexes have been barricaded.
A representative of the Judicial Staff Union of Nigeria told the press that the action, which is over pay and conditions, would last until the government calls the union back to the negotiating table.
United States - Oregon truckers protest termination of retiree benefits
Truckers rallied outside Oak Harbor Freight Lines in Portland, Oregon, last Thursday to protest the company's abrupt decision to strip retirees of health care benefits. The termination of retiree benefits is the company's latest maneuver during a strike involving about 600 truckers from Oregon, Washington, and Idaho that is now in its 12th week.
Bob Anderson, a 14-year driver at the Portland terminal, stated, "We believe our retirees have upheld their part of the bargain, and now the company is abandoning them. The retirees are the people who built Oak Harbor Freight. It seems as if the company is done with them now and wants to get rid of them."
Retiree Marv Deegan added, "What the company has done to us is making it difficult to eat. When you are on a fixed income and you have to pay a huge amount just to keep your health care, there is hardly enough money left for food."
By Lucas Adler ,12 December 2008
On December 5, about 100 employees of the bankrupt auto parts supplier HWU occupied their factory in the small town of Hohenlockstedt, north of Hamburg. The workers are determined to defend their jobs and prevent the planned closure of the plant at the end of the year.
The workers’ union, IG Metall, is attempting to end the factory occupation following complaints from union bureaucrats at a major auto manufacturer that the action was threatening to disrupt production at that other firm.
HWU produces parts for catalytic converters, steering wheels and door locks. In June 2008, HWU was sold by its parent company, the Vollmann Group, to Horst Strodtkötter, a former employee at the factory. The workforce only learned of their new owner June 30, at a factory meeting that the new managing director did not attend.
Then six weeks ago, on October 29, Strodtkötter informed the workforce that HWU was bankrupt and unable to pay their wages in October. Strodtkötter declared that a 30 percent drop in orders resulting from the current crisis in the automotive industry had driven the company into bankruptcy.
The workers reacted at that time with a spontaneous 24-hour occupation of the premises. Their main concern was to prevent the removal of any parts or machinery that would make further production at the factory impossible. Following the declaration of a bankruptcy administrator that the company had sufficient orders, and that the outstanding wages could be paid out of insolvency funds (Insolvenzgeld--money paid by the government to workers at bankrupt firms, out of a levy on the owners), the employees returned to work.
Since then the workforce has been kept completely in the dark about any further developments. There was no further information on the future of the factory from either the managing director or the bankruptcy trustee. When it was announced last week that at the end of the year the insolvency funds would be exhausted, workers reoccupied the plant on Friday.
On Tuesday morning the factory council finally informed the workforce about the plan to close the plant. The majority of workers are to be made redundant by December 31. A skeleton staff of between 25 to 30 workers will be retained until the end of March to wind down the factory. The only hope for any retention of jobs, according to IG Metall, was via the creation of some sort of transfer company (a firm specializing in matching laid-off workers with new jobs).
The workers at the factory, however, place absolutely no confidence in such a transfer company. They are all convinced that the chances of finding alternative work in the present economic climate are almost zero. Many workers have been employed at the factory for over two decades and are ill-equipped to find new jobs at this stage of their lives and careers.
Hohenlockstedt is a small town of approximately 6,200 inhabitants in rural Schleswig-Holstein. At its peak, the factory was a thriving enterprise with up to 700 employees. Older inhabitants of the town recall when the factory operated three-shifts some 50 years ago. But such times are long past.
One worker with 37 years in the plant told a WSWS reporter how he had begun his apprenticeship there as a toolmaker and in recent years had worked predominantly in the production of spare parts. The situation for many workers is very bitter, he explained:
“Entire lives are at stake. There are many workers who began their working lives here, built a house and have small children. And then suddenly one day we were informed that everything is gone. After working here for over 35 years, I’m told that as of January 1, I can only inspect my workplace from the other side of the factory gate.”
An HWU employee who has worked as a toolmaker at the factory for 20 years stressed that the jobs situation in the region was very bad: “In the extreme case, you would have to move away from here to find new work. But under conditions where everybody has the same idea it will be difficult to find work.”
A somewhat younger worker, who started at the factory as an apprentice in 1988, pointed to the anger of the HWU employees—in particular because they had been informed about the factory’s plight at such a late stage. Workers are angry that all the skills and knowledge built up over decades of employment are now considered worthless and summarily being dismissed.
The WSWS also spoke with the chairman of the works council, Steffen Schmidt, and his deputy, Alfred Butt. When asked why IG Metall had done nothing to organise a more extensive campaign to defend the workers’ jobs, they responded by referring to disputes between the “works council princes” (union officials) active in the big car plants, who are intent on defending their own factories at the expense of all others and therefore make impossible any sort of broader solidarity between different plants and their workforces.
The perspective of IG Metall
The announcement of the closure of the facility was preceded by a series of measures aimed at reorganising the factory and which involved considerable sacrifices on the part of the workforce. The union enforced these measures by arguing that they were the only alternative to job cuts and HWU’s closing down. The result now is the complete closure of the plant. The perspective of ‘saving jobs’ by accepting wage cuts and other concessions failed catastrophically.
In 2002, IG Metall signed a contract with HWU involving a year-long reduction of the working week from 35 to 30 hours for its 225 employees with a 14 percent cut in wages. Just two years after the expiry of this contract, management announced the first bankruptcy of the factory in October 2005. The bankruptcy procedure at that time called for the shedding of 80 jobs.
IG Metall officials reacted by reaching a new contract, which abolished existing Christmas benefits and accepted other concessions. This contract ran until September 2007, when it was replaced by another involving further attacks on wages and working conditions, including the abolition of holiday pay. In return, workers were given a guarantee that their jobs would be safe until the end of 2009. This assurance has now been consigned to the waste bin following the latest declaration of bankruptcy.
The various concessions made by the trade union were incapable of saving a single job. Instead the workers were left unprepared for the planned closure of the factory. The union and the works council now regard the closure of the factory as inevitable. Their only concern is how best to negotiate the option of a possible transfer company.
IG Metall is trying to call off the occupation to ensure that the auto companies supplied by HWU receive the needed parts. The bureaucracy’s main concern is the smooth working of the German auto industry, not the fate of the HWU or any other workers.
HWU workers should establish contact with workers at these companies, independently of IG Metall, and organise a common struggle to defend jobs and production. The only future for auto workers lies in a fight for socialist policies and the nationalization of the industry under workers’ control.
In order to step up pressure on workers to return to work, managing director Strodtkötter posted a letter on the company bulletin board Tuesday afternoon threatening the immediate sacking of workers who refused to return to work. He also announced that striking workers would be forced to pay large sums to compensate for lost production.
The occupation of the HWU factory should be supported by all workers. It raises important political questions, which are relevant for workers at other companies. The most important of these questions is: who controls the productive forces and in whose interest should they be organised?
Workers Struggles:
Argentine bank employees to strike this week
Bank employees in Argentina last week rejected a 5 percent wage increase. Union leader Juan José Zanola called the offer a provocation. He also accused the banks of hiring goons to frighten bank employees into resigning. Over 1,500 employees have been forced to resign that way; a procedure that the union calls ‘disguised sackings.'
"In any case," he said, "we will strike on December 11 and 12, and we decided to add the 15th and 16th to continue to press for our wage demands." Contract negotiations are at a standstill, despite a government imposed cooling-off period and the intervention of a government mediator.
Argentine banks have been hit hard by the world financial crisis. This is now taking the form of capital flight. Over US $ 4 billion left the country in October. The total for the year is expected to top US $ 25 billion.
French ports workers strike
Port workers at the Fos-Lavera oil hub near Marseille have been on strike for a week, according to latest reports. Their action has blocked almost 50 ships, including 13 oil tankers and 22 oil product vessels, three chemical and seven gas tankers from entering France’s largest oil port.
The strike is in protest at the privatisation of the port complex. French unions and port employers signed an agreement in October, opening the way to privatise seven ports, including Fos-Lavera. The strategic port, with an annual oil traffic of 64.2 million tonnes, supplies crude to six refineries in southern and eastern France with an output capacity of 800,000 barrels per day (bpd). Crude from the terminal also supplies the 310,000-bpd Miro refinery in Germany and the 68,000-bpd Cressier refinery in Switzerland.
France’s petroleum industry body, UFIP, said that the dispute had cost the oil industry US$1.0-1.5 million a day and was forcing refiners to lower their output.
A Marseille port spokeswoman said that a final deal, which will see private companies take over unloading at the docks previously run by the state, needs to be approved by the end of January.
Mass demonstrations in Ireland to counter attacks on education
Between 40,000 and 70,000 people protested in Dublin on December 6 against spending cuts in education in what is believed to have been the largest demonstration in the capital since protests against the Iraq war. The protest formed part of a growing number of demonstrations against recent government policy announcements.
The demonstration was intended to highlight issues such as the increase in the pupil-teacher ratio, the removal of free book schemes and English support teachers, the condition of school buildings and the removal of grants for Traveller education.
Protesters carried numerous placards, including ones that read, “Schools Unite Against Cuts,” “Leave Our Kids Alone,” “Don’t Make Our Children Pay” and “28:1, Good Odds for a Horse, Not A Child.”
Teachers, parents and children marched from Parnell Square to Merrion Square as a series of nationwide protests against education cuts reached its climax. The march was organised jointly by the Association of Secondary Teachers (ASTI), the INTO and the Teachers’ Union of Ireland (TUI).
The unions claim that altogether 120,000 people have now marched against the school spending measures in the budget when previous demonstrations in Donegal, Cork, Galway and Tullamore are considered.
Tens of thousands of teachers, students and parents have held a series of protests against staff shortages and increased class sizes in recent months. The government recently gave in to one of the teachers’ demands and allocated additional funding to hire substitute teachers in secondary schools.
The government presented the 2009 budget in October, almost two months earlier than usual, to respond to a rising shortfall in tax revenues after Ireland slid into recession. This week, it said a further deterioration in public finances showed it would miss some targets set out in the 2009 budget. The government expects the 2009 budget deficit to reach 6.5 percent of gross domestic product, more than double the level allowed by European Union rules, despite cutting spending and raising several different taxes in October.
Irish childcare workers and parents protest
Hundreds of parents and childcare workers protested, December 11, in response to controversial government funding changes they believe could devastate the sector and lead to widespread creche closures, according to the Irish Independent.
The protests in Dublin and Cork are aimed at forcing a “re-think” on the Community Childcare Subvention Scheme (CCSS) that, critics claim, will generate both higher fees and the closure of smaller creches.
Childcare organiser at the union, SIPTU, Darrragh O’Connor said, “Up until recently, projects received a staffing grant that allowed them to set fees that took full account of the individual circumstances of each family. However, the introduction of the CCSS has seen this replaced by a rigid set of criteria that has seen fees rise dramatically for many low-wage families.”
In some cases, the impact on fees has been enormous—with some facilities increasing their charges for working parents by €113 a week. One parent, Michael Daly, of the Brooklodge Community Playschool, in Glanmire, Cork, said that the new government funding policies are making life impossible.
“There are roughly 40 children in the group—and it became very apparent last week that the playschool will be in a deficit of up to €4,000 and the parents will have to make-up the shortfall. And a lot of parents are finding it hard in the current economic climate,” he said.
Strike threats from UK postal workers
Postal workers in the Bridgwater area of Somerset have voted to strike over their working conditions, according to the BBC. Members of the Communication Workers Union (CWU) plan to walk out at Christmas in protest at their full-time jobs being replaced with part-time roles.
The dates of the strikes have yet to be announced.
Around 400 postal workers at the Bolton Mail Centre in Farnworth are to stage a 24-hour strike on December 19—one of the busiest mail days of the year—in protest at plans to close the centre.
The Stonehill Road depot is due to shut in 2010 as part of a Royal Mail cost-cutting exercise. In a ballot, CWU members at the depot voted by 77 percent in favour of the strike. Other Royal Mail centres at Stockport, Crewe and Liverpool will also be shut on the same day because of industrial action.
Rail workers on London Tube in second strike for pay parity
Rail workers responsible for finding structural faults and maintaining the electrical supply to London’s underground rail network began their second 36-hour strike December 7 after employer EDF Energy Powerlink refused to budge on their claim for pay parity with day workers.
Rail, Maritime and Transport union (RMT) General Secretary Bob Crow said, “Despite the overwhelming vote for action and an absolutely rock-solid strike in November, EDF Energy Powerlink has so far refused to acknowledge that shift testers should have pay-parity with their non-shift colleagues. Day-work staff rightly received a £3,000 increase for delivering flexibility, and their shift-working colleagues are simply seeking recognition of the flexibility they too have delivered, not least in accepting sweeping shift changes that have disrupted their work-life balance.”
Shift testers are responsible for finding and fixing faults at London Underground’s more than 250 power substations and maintaining the power supply. In ballots in October, RMT members voted by 21 to 2 for strike action and by 22 to 1 for action short of strikes. The first 36-hour strike by the 250 shift testers was held between November 16 and 18. Since November 16, they have made themselves unavailable for work after the end of any turns unless there is a direct and imminent danger to human life.
Demonstration by the Iraqi engineers in central Baghdad
Around 250 engineers took part in a sit-in, December 2, at Firdos Square in central Baghdad. The workers later on marched to the Ministry of Agriculture. Demonstrators demanded the restoration of professional allowances that were halted after April 9, 2003.
The protest was organised by the Union of Agricultural Engineers. Representatives of unions of teachers, veterinarians and health professionals also joined the protest. The president of the union announced that if its demands are not met by the Ministry of Agriculture, the union will call for a general strike in all the ministries across Iraq.
Striking Chevron oil workers injured by security forces in Nigeria
On December 3, striking workers at the Chevron plant in the Delta area of Nigeria set up a picket outside the plant. Vanguard reported that the strikers used more than 100 tankers to barricade the entrance to the plant and temporarily halted traffic along the NPA Expressway. The strikers were protesting the threatened sacking of 122 workers for indicating their interest in joining the National Union of Petroleum and Gas Workers (NUPENG).
According to Vanguard, “Anti-crime mobile, regular policemen and soldiers, who were drafted in to beef up security at the company, threw tear gas and used gun butts to beat members of the union in an orchestrated effort to break up their rank[s].”
Fifteen strikers were injured, and some of them had to be taken to hospital for treatment.
The local NUPENG chairperson, who was beaten by the security personnel, said, “We are here to tell Deltans [residents of the Niger Delta] and Nigerians of police and soldiers’ brutality on innocent Nigerians…. Today we are at Chevron’s gate right now to protest CNL management grand design to flush out NUPENG members in the company’s operations.” He claimed that Chevron gave the security operatives an order to shoot on sight.
Namibian fish factory workers on strike over pay
Workers at Pescanova fish factory in Lüderitz, Namibia, went out on strike on December 9, after pay negotiations failed to produce an agreement.
In previous years, there have been several strikes and other disputes at the factory. Last year, a strike over pay and the company’s failure to honor an agreement to make temporary workers permanent was narrowly averted.
Nigerian doctors on strike
Civil service doctors in Anambra State, Nigeria, have been on strike for two months. The dispute is over an unpaid 22 percent salary increase, which has been approved for doctors nationwide. Another cause of anger is the gulf that has opened up between their terms of employment and those of the specialist doctors.
Doctors employed within local government, where they are designated medial officers of health, and hospital consultants are continuing to work.
The all-out indefinite strike of Nigerian judiciary staff, which began on December 1, continues to paralyze the law courts. In Abakaliki, Ebonyi State, the gates of the High Court have been locked, and in other areas of the country, gates leading to judicial complexes have been barricaded.
A representative of the Judicial Staff Union of Nigeria told the press that the action, which is over pay and conditions, would last until the government calls the union back to the negotiating table.
United States - Oregon truckers protest termination of retiree benefits
Truckers rallied outside Oak Harbor Freight Lines in Portland, Oregon, last Thursday to protest the company's abrupt decision to strip retirees of health care benefits. The termination of retiree benefits is the company's latest maneuver during a strike involving about 600 truckers from Oregon, Washington, and Idaho that is now in its 12th week.
Bob Anderson, a 14-year driver at the Portland terminal, stated, "We believe our retirees have upheld their part of the bargain, and now the company is abandoning them. The retirees are the people who built Oak Harbor Freight. It seems as if the company is done with them now and wants to get rid of them."
Retiree Marv Deegan added, "What the company has done to us is making it difficult to eat. When you are on a fixed income and you have to pay a huge amount just to keep your health care, there is hardly enough money left for food."
ECO BRIEFS - 13.12.2008
ECONOMIC BRIEFS – 13.12.08
* * * * *
Axis Bank expanding in South, to increase headcount (BL 13.12.08)
Axis Bank is in the process of expanding its branch network and upgrading its extension counters to branches in the South. The bank has 181 branches in the South zone comprising the four States – Tamil Nadu, Karnataka, Kerala and Andhra Pradesh. Its President (South Zone), Mr C.P. Rangarajan, told that there were 17 extension counters in this zone initially. “The process of upgrading 13 of these to branches is over. We will upgrade the remaining ones before the end of this fiscal,” he said and added that the RBI has given the bank licence to add another 55 branches in this zone. “We have firmed up 32 locations and these would become operational by March 2009,” Mr Rangarajan said. ‘South zone comprises 3,700 employees. We will add about a thousand more in a year’s time. We place graduates, hire off campus albeit selectively after a written test,” he said, adding “career progression is matchless and the package on par with the industry.” South zone has about 30-lakh customers and is roping in about one-lakh new customers every month. “Our CASA deposit at Rs 8,000 crore is about 52 per cent of our deposit. Our CASA target for this fiscal is Rs 11,000 crore,” he said.
Kotak Mahindra Bank to launch corporate credit cards (BL 13.12.08)
Kotak Mahindra Bank is looking at launching a corporate credit card product and also enter into partnership programmes for launching co-branded credit cards by April 2009. “We are looking at entering into partnerships in the high-end segments in airline, retail and entertainment like movie or dining chain. An announcement in this regard is likely by January and launch by March or April,” Mr Subrat Pani, Business Head (Cards), Kotak Mahindra Bank, told. The bank entered the credit card business earlier this year with the launch of two Visa Gold Cards, a Visa Platinum Card and a Visa Signature Card to complete the range of financial services from the Kotak Group. Mr Pani said that since the launch seven months back, they have issued more than 1 lakh cards and are on course to meet the first year (April 2009) target of 2,50,000 cards. “Last year, we saw a growth rate of 40 per cent when around Rs 58,000 crore was spent on credit cards. But this year, as compared with last year, the growth is likely to be around 24-25 per cent and end at around 22 per cent, which is likely to come down further to around 12 to 15 per cent next fiscal (2009-10),” he said.
StanChart ups stake in Indian arm (BL, ET, BS 13.12.08)
Standard Chartered Bank has increased its stake in Standard Chartered-STCI Capital Markets Ltd (formerly UTI Securities Limited) to 74.9 per cent. It announced on Friday that it completed the acquisition of an additional 25.9 per cent stake from Securities Trading Corporation of India (STCI). Standard Chartered Bank (StanChart) bought 49 per cent of UTI Securities Limited from STCI in January. Standard Chartered-STCI Capital Markets Ltd offers its services under the brand Standard Chartered Wealth Managers. The company plans to grow its retail and institutional stock broking and investment banking business. It is planning to offer additional products for retail customers and more research-based services and products for institutional stock broking.
Negative show: Industrial output contracts in October (BL, ET, BS, FE 13.12.08)
The Index for Industrial Production (IIP) has posted a negative growth of (-)0.4 per cent in October as against a robust 12.2 per cent in the same month last year. However, between April and October the index had grown by 4.1 per cent compared with 9.9 per cent in the same period in 2007. In August, the index had dipped to a growth of 1.3 per cent largely on account of a very poor growth in intermediates. It recovered in September to 4.8 per cent. Now, in October, it has actually turned negative. The manufacturing sector recorded a decline in production in October to the tune of (-)1.2 per cent, particularly because of a huge plunge in exports. Manufacturing sector grew by 13.8 per cent in October last year. Mining activities too slowed down substantially with a production growth of only 2.8 per cent as against 5.1 per cent as iron ore production came down following fall in Chinese demand after the Government imposed export tax on iron ore. However, electricity generation was maintained more or less at last year’s level, improving marginally to 4.4 per cent compared with 4.2 per cent a year ago. The Chief Statistician of India, Dr Pranab Sen, expects the index behaviour to come back to the normal pattern from next month. He added that the IIP had grown by more than 12 per cent in October 2007 and that was an outlier performance and this high base was why the October 2008 index was down so much.
Record wheat crop on cards (BL 13.12.08)
Total area sown under wheat, rapeseed-mustard and chana (gram) – the three main crops during the rabi or winter season – is much higher this time compared to 2007-08. According to the Agriculture Ministry’s latest Crop Weather Watch Report, released on Friday, wheat has been planted so far on 213.60 lakh hectares (lh), against 204.70 lh covered during the same period last year. If current trends hold and no abnormal rise in temperatures take place in March, there is every possibility of the 2008-08 wheat crop even surpassing last year’s record 78.40 million tonnes (mt).
Markets ignore weak IIP data, recover on short covering (BL, ET 13.12.08)
Indian equities tanked on Friday on news of the collapse of the US auto bail-out package, but bounced back to close on a flat note as traders covered their short positions. The Sensex was down more than 400 points from its previous during mid-day trade, but closed up 0.46 per cent at 9690; the Nifty was up 0.04 per cent at 2921. Foreign institutional investors were net sellers of equity on Friday for Rs 16.52 crore whereas domestic institutions were net buyers for Rs 325.81 crore.
SEBI announces Code for Conflict of Interest (BL, ET, FE 13.12.08)
SEBI has come out with a “Code of Conflict of Interest” for the members of its board. Probably in a first of its kind move for any financial market regulator in the country, SEBI has asked the members to make a set of disclosure within a month. Under the code, a member interested in any matter coming up for consideration at a meeting of the board will have to disclose the nature of interest. The member should not take part in any deliberations of the board with respect to such matter except to the extent of professional advice if sought by the board. The code also allows public to raise conflict of interest.
Significant growth in currency future contracts on NSE (BL 13.12.08)
Three months after the launch of the currency futures segment on the National Stock Exchange, the nascent sector is witnessing significant growth in volumes and number of participants. From a modest 65,978 contracts valued at Rs 291.04 crore as on August 29, the day on which currency futures was launched, it had grown to an all-time-high of 2,71,392 contracts valued at Rs 1,372.02 crore on November 20, Geojit Financial Services Ltd said. Over one lakh contracts are being daily traded on the NSE. The company has also opened more than 4,000 currency derivative accounts to date. Most of its currency derivatives’ customers consist of investors who are looking for instruments that allow them better returns in a market where equities remain volatile and are often hard to predict. Also, exporters/importers are active participants in currency derivatives as it helps to cover their positions and mitigate the risk.
Ban on wheat, rice futures may go by January: FMC chief (BL 13.12.08)
The Forward Markets Commission (FMC) plans to resume futures trading in wheat, rice, tur and urad latest by January 2009. Trading was suspended in all four commodities by the Union government since January (for tur and urad) and February (for rice and wheat) 2007 as an anti-inflationary measure. The ban, initially dubbed as a temporary measure, has continued for almost two years, against the recommendations of the Forward Markets Commission. The FMC Chairman clarified that with the easing of inflationary pressure and a comfortable stock position, the Union Government is in favour of resuming trading in these commodities.
Home truths (BL 13.12.08)
Following the economic stimulus package for certain sectors announced by the Government last week and the RBI’s repo rate cuts, public sector banks are set to offer more than just easier interest rates on home loans up to Rs 20 lakh. The banks will offer a package of cheaper loans that would include lower interest of between 7 and 9 per cent for a ten year period along with other concessions such as reduction in margin requirements. Yet, whether that will lead to a revival of demand for housing is quite another matter since the market is not determined by the cost of mortgage finance alone but also by prices. Despite the current slowdown and the gloomy forecast, housing prices have not fallen proportionately.
Forex reserves down by $1.83 b (BL, BS, FE 13.12.08)
The country’s foreign exchange reserves fell by $1.83 billion to $245.86 billion for the week ended December 5, due to revaluation of global currencies and also due to selling of dollars by the Reserve Bank of India. In the week under review, the euro weakened against the dollar and yen. The yen appreciated as risk averse investors turned away from currencies such as the dollar and euro in favour of the yen. According to a forex dealer with private bank, it is difficult to predict the rupee’s movement next week. “It should strengthen tracking the euro. But as equity markets worldwide are likely to remain weak, the rupee could remain weak. It may trade in the range of 48.50-48.90.”
World Bank clears $14-b lending to India for 2009-12 (BL, ET 13.12.08)
The World Bank Group has cleared India Country Strategy 2009-12 that envisages lending program of $14 billion for the next three years. The institution’s board discussed the Country Strategy at its meeting in Washington on December 11. Of the $14-billion assistance, about $9.6 billion will come from the International Bank for Reconstruction and Development (IBRD) and $4.4 billion will come from the International Development Association (IDA). India is looking to avail itself of a total annual assistance of $6 billion from the World Bank for the financial year ending June 2009, as against previous year’s level of $3 billion.
Nabard projects: Kerala’s credit potential in 2009-10 at Rs 44,484 cr (BL 13.12.08)
The National Bank for Agriculture and Rural Development (Nabard) has projected the credit potential for Kerala in 2009-10 at Rs 44,484 crore. The share of primary sector in the projected credit potential is Rs 16,964 crore (38.13 per cent), secondary sector Rs 6,316 crore (14.20 per cent) and that of tertiary sector Rs 21,204 crore (47.67 per cent), according to the ‘State Focus Paper – 2009-10’ brought out by Nabard.
Reliance Life unveils new product (BL 13.12.08)
Reliance Life Insurance has launched a new-unit linked product - Reliance Super InvestAssure Plan (RSIP)-Plus. This product would give loyalty additions of 2.5 per cent of annual premium after the third policy year, apart from earnings growth. Mr P. Nandagopal, CEO, Reliance Life Insurance, said that loyalty addition was a reward, in addition to investment and maturity benefits, that the company pays to its customers for continuing their patronage.
HDFC Bank cuts deposit rates by up to 100 basis points (ET 13.12.08)
HDFC Bank has cut deposit rates across various tenures from 25 bps to 100 bps. It also cut rates again in some of its benchmark rates, which it had cut last week. In the shorter tenures of 15-29 days and 30-45 days, the rates cuts have been steeper at 1%. In the benchmark 9 months 15 days-9 months 16 day tenure, it bought down the rate by another 25 bps. This is over and above the 1.5% cut last week.
PF interest rate to remain 8.5% this fiscal year (ET 13.12.08)
The 4.4 crore subscribers of the Employees Provident Fund Organisation (EPFO) should not expect any rise in their provident fund interest rate this fiscal. Labour minister Oscar Fernandes ruled out the possibility of increasing the rate of interest of the Employees Provident Fund (EPF) rates for this fiscal year. The PF rate will continue to be 8.5 % fourth time in a row.
Further cut in repo, reverse repo rates likely (ET 13.12.08)
Analysts are expecting aggressive action on the monetary policy front as the central bank and the government try to arrest the slowdown. Expectations are for a 150 basis points cut in the repo and reverse repo rates - two key short-term rates that are set by RBI. “The central bank has been aggressively cutting interest rates. But these interest rate signals have not yet reflected in the cost of credit as financial institutions have not brought down interest rates. Availability of credit also remains a major concern,” said DK Joshi, principal economist at credit rating company Crisil.
Higher WMA limit not enough for govt (ET 13.12.08)
According to data released by the Reserve Bank of India (RBI) in its weekly statistical supplement (WSS), government banks borrowed Rs 30,986 crore - way higher than the enhanced limit of Rs 20,000 crore, which was revised upwards from Rs 6,000 crore in November in anticipation of revenue mismatches, as two government bond auctions were cancelled during the month. WMA is a temporary advance to meet government revenue mismatches. When 75% of the limit of WMA is utilised by the government, RBI may trigger fresh floatation of market loans. Borrowings within the prescribed limit are at the prevailing repo rate, while loans in excess of the limit attract an additional 2% interest. Though reliance on RBI was anyway anticipated, what is disconcerting is the fact that the amount ended up being more than what was envisaged earlier.
Bank credit up 30 per cent (BS, FE 13.12.08)
Bank advances grew by 29.8 per cent on a year-on-year basis to Rs 27,21,732 crore at the end of November as against 22.5 per cent a year ago. The growth was partly due to demand from oil companies and increasing dependence of Indian companies on domestic resources rather than global markets. From April to November 2008, loan growth was 15.2 per cent as against 8.6 per cent during the same period previous year, according to the Reserve Bank of India (RBI) data. The non-food credit grew 58.5 per cent to Rs 26,71,339 crore during the one-year period. The reported credit growth is much above RBI’s estimate of 20 per cent for 2008-09. “The central bank opened a special window for non-banking financial companies (NBFCs) and mutual funds (MFs) in November. Cash-strapped financial institutions have borrowed from banks during this period,” said an executive from a public sector bank. On the backdrop of domestic risk aversion, deposits grew by 23.6 per cent to Rs 36,49,506 crore till November on a year-on-year basis. Demand deposit, or deposit for a tenure of less than one year, stood at Rs 4,65,349 crore, whereas time deposit, or deposit with a tenure of more than a year, stood at Rs 31,84,157 crore.
Key deficit indicators dip in H1 (FE 13.12.08)
The central government finances during the first half of 2008-09 may have witnessed buoyant tax collections but key deficit indicators such as revenue deficit (RD), gross fiscal deficit (GFD) and primary deficit have been higher reflecting higher non-plan revenue expenditure on subsidies, interest payments and plan revenue expenditure on social services, other economic services, and grants to states. As per cent of budget estimates, both revenue deficit and gross fiscal deficit were higher mainly due to rise in revenue expenditure, both non-plan and plan. During the first half, revenue deficit stood at Rs 78,313 crore, formed 141.9% of the budget estimates as against 85.5% during April-September 2007 primarily due to expenditure pressure emanating from interest payments, subsidies, other economic services, social services and grants to states. During 2008-09, GFD was budgeted to decline by 0.3% of GDP, to Rs 1, 33,287 crore over the provisional accounts of 2007-08. During the first half of 2008-09, GFD at Rs 1,02,654 crore was 77% of the budget estimates, higher than 53% a year ago reflecting the rise in RD.GFD as percentage of GDP was at 1.9% during April-September 2008, higher than 1.7% same time last year. Meanwhile, gross primary deficit during the first half of 2008-09 stood at Rs 16,593 crore as against the envisaged surplus of Rs 57,520 crore in 2008-09 (budget estimates).
Health insurance portability could be a reality now (FE 131.12.08)
Cheering the health insurance policy holders, the issue of health insurance portability has finally taken shape and just waiting for the approval from the Insurance Regulatory and Development Authority (IRDA). The General Insurance Council (GIC), which is the self regulatory body of nonlife insurance companies, has taken a decision on portability of health insurance products on Friday. J Hari Narayan, chairman, IRDA, said that “We are very much in favour of the issue and in fact we had been working with GIC for past three four months on it and I am happy to know that they have taken a decision on it”.
Home prices, demand & funding form a vicious circle (FE 13.12.08)
While the government is trying to get banks to begin lending after their liquidity concerns have been addressed by the slew of monetary measures by the central bank, most banks have nearly doubled the proportion of home loans granted on a construction-linked basis. Instead of a lumpsum disbursement to builders, banks give such loans mainly on the basis of progress made on construction of the property. But in doing so, they may just be moving towards what they want to avoid - losing money. Given the high prices of houses - which lead to lower demand, construction-linked disbursement of loans and the miniscule developer’s equity - chances are that the developer may not be able to take the project forward.
RBI measures not to have any immediate effect, say banks (FE 13.12.08)
Two major private sector banks, HDFC Bank and Axis Bank, are not expecting any immediate positive impact of the recent liquidity and rate cut measures by the Reserve Bank of India (RBI) on their credit and deposit portfolios. Paresh Sukthankar, executive director, HDFC Bank, has said that the bank has witnessed a moderation in the overall growth of loans as well as the term deposits due to the prevailing economic scenario in the country. In the last few months, HDFC Bank's two-wheeler as well as commercial vehicle loan portfolios have not grown at a healthy rate. A senior executive of Axis Bank said that he expected the BPLR to fall by at least 100 basis points within 4-6 weeks. "However, it may fail to stimulate the credit growth of the Indian banking space as consumer confidence is at its lowest. Also, the corporates are holding back their capex plans in anticipation of a lower interest rate regime. Next quarter may not be very rosy for the Indian banks," he said. Observed Sukthankar "Unless the liquidity dries up again, I foresee another round of reduction in deposit as well as lending rates to happen within a few weeks. I do not anticipate a cut in CRR by the regulator in the near future. Fortunately, we seem to be heading at around 7% inflation levels by the end of this fiscal," he said.
Major rates & parameters as on 12.12.08 (BL, RBI)
Rupee/$
Call Rates
Auction under RBI’s LAF
Govt. Securities (Yield)
Repo
Reverse Repo
8.24% 10-Yr 2018
7.95% 24 Yr- 2032
48.44/45
5.20-5.40%
Nil
Rs 6,590 Cr
6.21%
-
Nil
Rs 17,455 Cr
****
Source BL= Business Line, BS=Business Standard, ET=Economic Times & FE=Financial Express
* * * * *
Axis Bank expanding in South, to increase headcount (BL 13.12.08)
Axis Bank is in the process of expanding its branch network and upgrading its extension counters to branches in the South. The bank has 181 branches in the South zone comprising the four States – Tamil Nadu, Karnataka, Kerala and Andhra Pradesh. Its President (South Zone), Mr C.P. Rangarajan, told that there were 17 extension counters in this zone initially. “The process of upgrading 13 of these to branches is over. We will upgrade the remaining ones before the end of this fiscal,” he said and added that the RBI has given the bank licence to add another 55 branches in this zone. “We have firmed up 32 locations and these would become operational by March 2009,” Mr Rangarajan said. ‘South zone comprises 3,700 employees. We will add about a thousand more in a year’s time. We place graduates, hire off campus albeit selectively after a written test,” he said, adding “career progression is matchless and the package on par with the industry.” South zone has about 30-lakh customers and is roping in about one-lakh new customers every month. “Our CASA deposit at Rs 8,000 crore is about 52 per cent of our deposit. Our CASA target for this fiscal is Rs 11,000 crore,” he said.
Kotak Mahindra Bank to launch corporate credit cards (BL 13.12.08)
Kotak Mahindra Bank is looking at launching a corporate credit card product and also enter into partnership programmes for launching co-branded credit cards by April 2009. “We are looking at entering into partnerships in the high-end segments in airline, retail and entertainment like movie or dining chain. An announcement in this regard is likely by January and launch by March or April,” Mr Subrat Pani, Business Head (Cards), Kotak Mahindra Bank, told. The bank entered the credit card business earlier this year with the launch of two Visa Gold Cards, a Visa Platinum Card and a Visa Signature Card to complete the range of financial services from the Kotak Group. Mr Pani said that since the launch seven months back, they have issued more than 1 lakh cards and are on course to meet the first year (April 2009) target of 2,50,000 cards. “Last year, we saw a growth rate of 40 per cent when around Rs 58,000 crore was spent on credit cards. But this year, as compared with last year, the growth is likely to be around 24-25 per cent and end at around 22 per cent, which is likely to come down further to around 12 to 15 per cent next fiscal (2009-10),” he said.
StanChart ups stake in Indian arm (BL, ET, BS 13.12.08)
Standard Chartered Bank has increased its stake in Standard Chartered-STCI Capital Markets Ltd (formerly UTI Securities Limited) to 74.9 per cent. It announced on Friday that it completed the acquisition of an additional 25.9 per cent stake from Securities Trading Corporation of India (STCI). Standard Chartered Bank (StanChart) bought 49 per cent of UTI Securities Limited from STCI in January. Standard Chartered-STCI Capital Markets Ltd offers its services under the brand Standard Chartered Wealth Managers. The company plans to grow its retail and institutional stock broking and investment banking business. It is planning to offer additional products for retail customers and more research-based services and products for institutional stock broking.
Negative show: Industrial output contracts in October (BL, ET, BS, FE 13.12.08)
The Index for Industrial Production (IIP) has posted a negative growth of (-)0.4 per cent in October as against a robust 12.2 per cent in the same month last year. However, between April and October the index had grown by 4.1 per cent compared with 9.9 per cent in the same period in 2007. In August, the index had dipped to a growth of 1.3 per cent largely on account of a very poor growth in intermediates. It recovered in September to 4.8 per cent. Now, in October, it has actually turned negative. The manufacturing sector recorded a decline in production in October to the tune of (-)1.2 per cent, particularly because of a huge plunge in exports. Manufacturing sector grew by 13.8 per cent in October last year. Mining activities too slowed down substantially with a production growth of only 2.8 per cent as against 5.1 per cent as iron ore production came down following fall in Chinese demand after the Government imposed export tax on iron ore. However, electricity generation was maintained more or less at last year’s level, improving marginally to 4.4 per cent compared with 4.2 per cent a year ago. The Chief Statistician of India, Dr Pranab Sen, expects the index behaviour to come back to the normal pattern from next month. He added that the IIP had grown by more than 12 per cent in October 2007 and that was an outlier performance and this high base was why the October 2008 index was down so much.
Record wheat crop on cards (BL 13.12.08)
Total area sown under wheat, rapeseed-mustard and chana (gram) – the three main crops during the rabi or winter season – is much higher this time compared to 2007-08. According to the Agriculture Ministry’s latest Crop Weather Watch Report, released on Friday, wheat has been planted so far on 213.60 lakh hectares (lh), against 204.70 lh covered during the same period last year. If current trends hold and no abnormal rise in temperatures take place in March, there is every possibility of the 2008-08 wheat crop even surpassing last year’s record 78.40 million tonnes (mt).
Markets ignore weak IIP data, recover on short covering (BL, ET 13.12.08)
Indian equities tanked on Friday on news of the collapse of the US auto bail-out package, but bounced back to close on a flat note as traders covered their short positions. The Sensex was down more than 400 points from its previous during mid-day trade, but closed up 0.46 per cent at 9690; the Nifty was up 0.04 per cent at 2921. Foreign institutional investors were net sellers of equity on Friday for Rs 16.52 crore whereas domestic institutions were net buyers for Rs 325.81 crore.
SEBI announces Code for Conflict of Interest (BL, ET, FE 13.12.08)
SEBI has come out with a “Code of Conflict of Interest” for the members of its board. Probably in a first of its kind move for any financial market regulator in the country, SEBI has asked the members to make a set of disclosure within a month. Under the code, a member interested in any matter coming up for consideration at a meeting of the board will have to disclose the nature of interest. The member should not take part in any deliberations of the board with respect to such matter except to the extent of professional advice if sought by the board. The code also allows public to raise conflict of interest.
Significant growth in currency future contracts on NSE (BL 13.12.08)
Three months after the launch of the currency futures segment on the National Stock Exchange, the nascent sector is witnessing significant growth in volumes and number of participants. From a modest 65,978 contracts valued at Rs 291.04 crore as on August 29, the day on which currency futures was launched, it had grown to an all-time-high of 2,71,392 contracts valued at Rs 1,372.02 crore on November 20, Geojit Financial Services Ltd said. Over one lakh contracts are being daily traded on the NSE. The company has also opened more than 4,000 currency derivative accounts to date. Most of its currency derivatives’ customers consist of investors who are looking for instruments that allow them better returns in a market where equities remain volatile and are often hard to predict. Also, exporters/importers are active participants in currency derivatives as it helps to cover their positions and mitigate the risk.
Ban on wheat, rice futures may go by January: FMC chief (BL 13.12.08)
The Forward Markets Commission (FMC) plans to resume futures trading in wheat, rice, tur and urad latest by January 2009. Trading was suspended in all four commodities by the Union government since January (for tur and urad) and February (for rice and wheat) 2007 as an anti-inflationary measure. The ban, initially dubbed as a temporary measure, has continued for almost two years, against the recommendations of the Forward Markets Commission. The FMC Chairman clarified that with the easing of inflationary pressure and a comfortable stock position, the Union Government is in favour of resuming trading in these commodities.
Home truths (BL 13.12.08)
Following the economic stimulus package for certain sectors announced by the Government last week and the RBI’s repo rate cuts, public sector banks are set to offer more than just easier interest rates on home loans up to Rs 20 lakh. The banks will offer a package of cheaper loans that would include lower interest of between 7 and 9 per cent for a ten year period along with other concessions such as reduction in margin requirements. Yet, whether that will lead to a revival of demand for housing is quite another matter since the market is not determined by the cost of mortgage finance alone but also by prices. Despite the current slowdown and the gloomy forecast, housing prices have not fallen proportionately.
Forex reserves down by $1.83 b (BL, BS, FE 13.12.08)
The country’s foreign exchange reserves fell by $1.83 billion to $245.86 billion for the week ended December 5, due to revaluation of global currencies and also due to selling of dollars by the Reserve Bank of India. In the week under review, the euro weakened against the dollar and yen. The yen appreciated as risk averse investors turned away from currencies such as the dollar and euro in favour of the yen. According to a forex dealer with private bank, it is difficult to predict the rupee’s movement next week. “It should strengthen tracking the euro. But as equity markets worldwide are likely to remain weak, the rupee could remain weak. It may trade in the range of 48.50-48.90.”
World Bank clears $14-b lending to India for 2009-12 (BL, ET 13.12.08)
The World Bank Group has cleared India Country Strategy 2009-12 that envisages lending program of $14 billion for the next three years. The institution’s board discussed the Country Strategy at its meeting in Washington on December 11. Of the $14-billion assistance, about $9.6 billion will come from the International Bank for Reconstruction and Development (IBRD) and $4.4 billion will come from the International Development Association (IDA). India is looking to avail itself of a total annual assistance of $6 billion from the World Bank for the financial year ending June 2009, as against previous year’s level of $3 billion.
Nabard projects: Kerala’s credit potential in 2009-10 at Rs 44,484 cr (BL 13.12.08)
The National Bank for Agriculture and Rural Development (Nabard) has projected the credit potential for Kerala in 2009-10 at Rs 44,484 crore. The share of primary sector in the projected credit potential is Rs 16,964 crore (38.13 per cent), secondary sector Rs 6,316 crore (14.20 per cent) and that of tertiary sector Rs 21,204 crore (47.67 per cent), according to the ‘State Focus Paper – 2009-10’ brought out by Nabard.
Reliance Life unveils new product (BL 13.12.08)
Reliance Life Insurance has launched a new-unit linked product - Reliance Super InvestAssure Plan (RSIP)-Plus. This product would give loyalty additions of 2.5 per cent of annual premium after the third policy year, apart from earnings growth. Mr P. Nandagopal, CEO, Reliance Life Insurance, said that loyalty addition was a reward, in addition to investment and maturity benefits, that the company pays to its customers for continuing their patronage.
HDFC Bank cuts deposit rates by up to 100 basis points (ET 13.12.08)
HDFC Bank has cut deposit rates across various tenures from 25 bps to 100 bps. It also cut rates again in some of its benchmark rates, which it had cut last week. In the shorter tenures of 15-29 days and 30-45 days, the rates cuts have been steeper at 1%. In the benchmark 9 months 15 days-9 months 16 day tenure, it bought down the rate by another 25 bps. This is over and above the 1.5% cut last week.
PF interest rate to remain 8.5% this fiscal year (ET 13.12.08)
The 4.4 crore subscribers of the Employees Provident Fund Organisation (EPFO) should not expect any rise in their provident fund interest rate this fiscal. Labour minister Oscar Fernandes ruled out the possibility of increasing the rate of interest of the Employees Provident Fund (EPF) rates for this fiscal year. The PF rate will continue to be 8.5 % fourth time in a row.
Further cut in repo, reverse repo rates likely (ET 13.12.08)
Analysts are expecting aggressive action on the monetary policy front as the central bank and the government try to arrest the slowdown. Expectations are for a 150 basis points cut in the repo and reverse repo rates - two key short-term rates that are set by RBI. “The central bank has been aggressively cutting interest rates. But these interest rate signals have not yet reflected in the cost of credit as financial institutions have not brought down interest rates. Availability of credit also remains a major concern,” said DK Joshi, principal economist at credit rating company Crisil.
Higher WMA limit not enough for govt (ET 13.12.08)
According to data released by the Reserve Bank of India (RBI) in its weekly statistical supplement (WSS), government banks borrowed Rs 30,986 crore - way higher than the enhanced limit of Rs 20,000 crore, which was revised upwards from Rs 6,000 crore in November in anticipation of revenue mismatches, as two government bond auctions were cancelled during the month. WMA is a temporary advance to meet government revenue mismatches. When 75% of the limit of WMA is utilised by the government, RBI may trigger fresh floatation of market loans. Borrowings within the prescribed limit are at the prevailing repo rate, while loans in excess of the limit attract an additional 2% interest. Though reliance on RBI was anyway anticipated, what is disconcerting is the fact that the amount ended up being more than what was envisaged earlier.
Bank credit up 30 per cent (BS, FE 13.12.08)
Bank advances grew by 29.8 per cent on a year-on-year basis to Rs 27,21,732 crore at the end of November as against 22.5 per cent a year ago. The growth was partly due to demand from oil companies and increasing dependence of Indian companies on domestic resources rather than global markets. From April to November 2008, loan growth was 15.2 per cent as against 8.6 per cent during the same period previous year, according to the Reserve Bank of India (RBI) data. The non-food credit grew 58.5 per cent to Rs 26,71,339 crore during the one-year period. The reported credit growth is much above RBI’s estimate of 20 per cent for 2008-09. “The central bank opened a special window for non-banking financial companies (NBFCs) and mutual funds (MFs) in November. Cash-strapped financial institutions have borrowed from banks during this period,” said an executive from a public sector bank. On the backdrop of domestic risk aversion, deposits grew by 23.6 per cent to Rs 36,49,506 crore till November on a year-on-year basis. Demand deposit, or deposit for a tenure of less than one year, stood at Rs 4,65,349 crore, whereas time deposit, or deposit with a tenure of more than a year, stood at Rs 31,84,157 crore.
Key deficit indicators dip in H1 (FE 13.12.08)
The central government finances during the first half of 2008-09 may have witnessed buoyant tax collections but key deficit indicators such as revenue deficit (RD), gross fiscal deficit (GFD) and primary deficit have been higher reflecting higher non-plan revenue expenditure on subsidies, interest payments and plan revenue expenditure on social services, other economic services, and grants to states. As per cent of budget estimates, both revenue deficit and gross fiscal deficit were higher mainly due to rise in revenue expenditure, both non-plan and plan. During the first half, revenue deficit stood at Rs 78,313 crore, formed 141.9% of the budget estimates as against 85.5% during April-September 2007 primarily due to expenditure pressure emanating from interest payments, subsidies, other economic services, social services and grants to states. During 2008-09, GFD was budgeted to decline by 0.3% of GDP, to Rs 1, 33,287 crore over the provisional accounts of 2007-08. During the first half of 2008-09, GFD at Rs 1,02,654 crore was 77% of the budget estimates, higher than 53% a year ago reflecting the rise in RD.GFD as percentage of GDP was at 1.9% during April-September 2008, higher than 1.7% same time last year. Meanwhile, gross primary deficit during the first half of 2008-09 stood at Rs 16,593 crore as against the envisaged surplus of Rs 57,520 crore in 2008-09 (budget estimates).
Health insurance portability could be a reality now (FE 131.12.08)
Cheering the health insurance policy holders, the issue of health insurance portability has finally taken shape and just waiting for the approval from the Insurance Regulatory and Development Authority (IRDA). The General Insurance Council (GIC), which is the self regulatory body of nonlife insurance companies, has taken a decision on portability of health insurance products on Friday. J Hari Narayan, chairman, IRDA, said that “We are very much in favour of the issue and in fact we had been working with GIC for past three four months on it and I am happy to know that they have taken a decision on it”.
Home prices, demand & funding form a vicious circle (FE 13.12.08)
While the government is trying to get banks to begin lending after their liquidity concerns have been addressed by the slew of monetary measures by the central bank, most banks have nearly doubled the proportion of home loans granted on a construction-linked basis. Instead of a lumpsum disbursement to builders, banks give such loans mainly on the basis of progress made on construction of the property. But in doing so, they may just be moving towards what they want to avoid - losing money. Given the high prices of houses - which lead to lower demand, construction-linked disbursement of loans and the miniscule developer’s equity - chances are that the developer may not be able to take the project forward.
RBI measures not to have any immediate effect, say banks (FE 13.12.08)
Two major private sector banks, HDFC Bank and Axis Bank, are not expecting any immediate positive impact of the recent liquidity and rate cut measures by the Reserve Bank of India (RBI) on their credit and deposit portfolios. Paresh Sukthankar, executive director, HDFC Bank, has said that the bank has witnessed a moderation in the overall growth of loans as well as the term deposits due to the prevailing economic scenario in the country. In the last few months, HDFC Bank's two-wheeler as well as commercial vehicle loan portfolios have not grown at a healthy rate. A senior executive of Axis Bank said that he expected the BPLR to fall by at least 100 basis points within 4-6 weeks. "However, it may fail to stimulate the credit growth of the Indian banking space as consumer confidence is at its lowest. Also, the corporates are holding back their capex plans in anticipation of a lower interest rate regime. Next quarter may not be very rosy for the Indian banks," he said. Observed Sukthankar "Unless the liquidity dries up again, I foresee another round of reduction in deposit as well as lending rates to happen within a few weeks. I do not anticipate a cut in CRR by the regulator in the near future. Fortunately, we seem to be heading at around 7% inflation levels by the end of this fiscal," he said.
Major rates & parameters as on 12.12.08 (BL, RBI)
Rupee/$
Call Rates
Auction under RBI’s LAF
Govt. Securities (Yield)
Repo
Reverse Repo
8.24% 10-Yr 2018
7.95% 24 Yr- 2032
48.44/45
5.20-5.40%
Nil
Rs 6,590 Cr
6.21%
-
Nil
Rs 17,455 Cr
****
Source BL= Business Line, BS=Business Standard, ET=Economic Times & FE=Financial Express
Subscribe to:
Posts (Atom)
