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HSBC’s India growth hit by tight monetary policy in ’07

HSBC’s India growth hit by tight monetary policy in ’07
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First Published: Mon, Mar 03 2008. 11 03 PM IST

India focus: Naina Lal Kidwai, HSBC’s country head in India. (Photo: Hemant Mishra/ Mint)
India focus: Naina Lal Kidwai, HSBC’s country head in India. (Photo: Hemant Mishra/ Mint)
Updated: Mon, Mar 03 2008. 11 03 PM IST
Mumbai: The world’s third largest banking group by market capitalization HSBC Holdings Plc. blamed “monetary tightening and adverse regulatory policies” for the loan growth slow down in India, as part of its 2007 results.
India focus: Naina Lal Kidwai, HSBC’s country head in India. (Photo: Hemant Mishra/ Mint)
Adverse regulatory policies, according to the London-headquartered bank, “restricted the activities of recovery agents.”
HSBC also said aggressive growth strategies by several banks has compressed margins and reduced overall asset quality in India and its pre-tax loss in personal finance business in India rose to $70 million (Rs282 crore) from $24 million a year ago, due to planned investment in growing a consumer finance business and higher loan impairment charges, the bank said.
The bank’s personal lending portfolio, excluding mortgages, grew by 67% in 2007. Funds under its wealth management business in India grew 91% and the number of insurance policies more then doubled.
“India is very highly focused market for the group and the focus is going to grow. The group is supporting us by capital infusion, launch of new products and doubling our employee strength,” said Naina Lal Kidwai, HSBC’s country head in India.
The bank’s corporate loans rose to $517 million in 2007 from $323 million a year ago.
According to her, restriction on recovery agents has not had bearing on the bank’s profit but in the long run it may have an impact. “It has been an issue in a few cities where the recovery agents were finding it difficult to collect (bad loans) but things are becoming normal now,” Kidwai said.
Globally, HSBC’s profits rose 10% as buoyant growth in Hong Kong and elsewhere in Asia helped Europe’s biggest bank absorb $17.2 billion in bad debts as the US housing crisis deepened. HSBC said the outlook for 2008 was uncertain and that the US economic slowdown and credit outlook “may well get worse”.
It said its conservative balance sheet and international spread left it well positioned and it expects to improve margins and will “continue to invest in building market presence at a time when others with weaker capital positions are constrained”.
-Anup Roy
(Reuters contributed to this story.)
‘Betrayed’ on Telengana, 4 members quit Lok Sabha
New Delhi: All four Telangana Rashtra Samithi (TRS) members of Parliament (MPs), including their leader K. Chandrasekhar Rao, resigned from the Lok Sabha on Monday protesting the delay in creation of a separate Telengana state.
Chandrasekhar Rao, Vinod Kumar, Ravindra Naik and T. Madhusudan Reddy submitted their resignations to Lok Sabha Speaker Somnath Chatterjee as the House assembled in the morning. Raising slogans of “Jai Telengana”, they walked out of the House.
The move is being seen as TRS’ attempt to put pressure on the UPA government on the demand for a Telengana state.
Leader of Opposition L. K. Advani noted that it was the first occasion when members have given their resignation in the House itself.
“In many, many years, it is the first occasion in the House that members have submitted their resignation in the House itself. The issue of Telengana deserves a full-fledged discussion,” Advani said while complaining that the President’s address to Parliament did not mention the issue.
The development also saw members of the treasury and the Opposition trading charges.
Following Monday’s developments, all 16 party MLAs and three MLCs will resign from the Andhra Pradesh Assembly on Tuesday.
While announcing the decision to resign from the Lok Sabha on Sunday, Rao had accused the Congress, with which it had contested the previous Assembly elections, of betraying it after coming to power on the issue of a separate Telengana state.
Inflation still a threat, Chidambaram says
New Delhi: Inflation in India is still a threat because of high food prices, finance minister P. Chidambaram told businessmen on Monday, as he promised to consider policy intervention if growth slowed in any industrial sector of the $1 trillion (Rs40 trillion) economy.
India’s annual inflation rate hit 4.89% in mid-February, the highest in more than eight months and just below the Reserve Bank of India’s target of 5% for the fiscal year ending 31 March.
“One of the reasons why inflation is still a threat is because of food price inflation,” the minister said, three days after he unveiled the 2008 Budget.
“If we grow enough food to feed our people, we are insulated from world prices, but if we are dependent on imports we are subject to world prices.”
World prices of wheat had increased by 88% since April 2007 and of rice by 15%, the minister said. India’s food output has failed to keep pace with the demands of its 1.1 billion population, most of whom rely on the land for all or part of their livelihoods.
“Taking all this into account, we came to the conclusion that the distress of the farmers calls for an unorthodox response. And the response was the farm loan waiver,” Chidambaram said.
The minister announced in the Budget a plan to write off Rs60,000 crore of farmers’ debts in a move, analysts say, is aimed at wooing voters ahead of May 2009 elections.
RBI may cap FII position on interest rate futures
Mumbai: The Reserve Bank of India (RBI) has proposed a limit of $4.7 billion (Rs18,941 crore) for long positions by foreign institutional investors (FIIs) in interest rate futures, according to a report inviting comments and released on Monday.
The gross long positions in the cash and futures markets should not exceed the maximum-permissible cash market limit, says the report of the working group. FIIs may also be allowed to take short positions in interest rate futures, but only to hedge actual exposure in the cash market up to the limit permitted, it added. Currently, FIIs can take positions in interest rate futures up to their respective cash market exposure, plus an additional $100 million. However, considering the number of FIIs and sub-accounts, the additional $100 million would imply a total futures position of $128.3 billion, far above the permitted $4.7 billion, the report says.
-Staff Writer
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First Published: Mon, Mar 03 2008. 11 03 PM IST