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BW Businessworld

A Case For Cuts

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The Reserve Bank of India may not think it is time for a rate cut, but its European peer thinks otherwise. To help the ailing euro zone economy, the European Central Bank (ECB) on 5 July cut interest rates to a record low. The quarter-point cut in the ECB's main refinancing rate to 0.75 per cent was in line with market expectations. The ECB hopes the cuts, along with measures that euro zone country heads had agreed upon last week, will help boost crisis-hit economies. The ECB move came after data showed that even Germany, the strongest in the 17-member zone, was entering a mild downturn. Echoing the ECB sentiment was its counterpart in the world's strongest economy. China's central bank cut interest rates for the second time in two months, signalling that all is not hunky-dory there. China's benchmark lending rates will fall 31 basis points to 6 per cent, and deposit rates will be cut by 25 basis points to 3 per cent. Is the RBI listening?

Time To Mine
The Supreme Court-appointed Central Empowered Committee has given its nod to eight mines and approved restarting of iron ore mining in Karnataka. These mines together would yield around 5.5 million tonne per annum (mtpa) of iron ore. Of the lot, Vedanta-owned Sesa Goa would account for about 2.5 mtpa. That said, these mines now need approval from the Indian Bureau of Mines to start full operations. 

Fixing Game

EXIT ROUTE: Barclays' CEO Bob Diamond resigned after the Libor fixing scandal

If you thought the Barclays mess was an exception, you were wrong. Bob Diamond, who had to quit as the UK bank's boss after an interest rate manipulation row broke out, hints what the bank did was more the rule. Diamond said banks across the world were fixing interest rates in the run-up to the financial crisis, but regulators did not stop them. Diamond pointed a finger at 15 banks, including the state-owned Royal Bank of Scotland, Lloyds and Halifax Bank of Scotland. 

Finding Takers
After a failed attempt to sell 26 per cent in its airport business to Singapore's Changi Airport, GVK Power & Infrastructure is in talks with a few private equity firms to dilute stake in GVK Airport Holdings. 

Shrinking Scam
German sportswear maker Adidas told India's Serious Fraud Investigation Office that it lost around Rs 170 crore due to "goodwill impairment" after it bought Reebok India. In May, Adidas said it lost Rs 870 crore due to alleged misappropriation by former top executives Subhinder Singh Prem and Vishnu Bhagat.

Good News Index
India's factories in June increased production and hired workers at the fastest rate in more than two years, showed the HSBC manufacturing Purchasing Managers' Index. But falling demand abroad hit growth in new export orders. The index rose to 55.0 in June, a four-month high, from 54.8 in May. It has stayed above the 50 mark that divides growth and contraction for more than three years. 

FLOP: Microsoft's Aquantive

Systems Failure
Microsoft said it would take a $6.2 billion accounting charge in its online services division for the failed acquisition AQuantive, a digital advertising company Microsoft bought in 2007 to take on Google. The company said it took the write-down because "expectations for future growth and profitability are lower than previous estimates" for the online services unit.

Oil's Not Well
Investment bank Goldman Sachs last week turned negative on Indian oil marketing firms. For instance, it downgraded Indian Oil and Hindustan Petroleum to "sell" from "neutral". It said any diesel price hike would only reduce the losses, without any major positive impact on profitability.

Stress On Savings
RBI governor D. Subbarao wants big banks to offer customer-friendly savings rate policies. Even though the RBI deregulated savings rates last year, he said only a few small private banks had raised deposit rates and improved their share.

(This story was published in Businessworld Issue Dated 16-07-2012)