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SBI's growth, stable inflation & more… - Views on News from Equitymaster
 
 
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  • Jul 25, 2008

    SBI's growth, stable inflation & more…

    One down, six more to go for SBI

    India's premier bank, State Bank of India (SBI), finally got the government approval for merging its 100% subsidiary, State Bank of Saurashtra (SBS). It may be noted that the boards of both the banks had approved the proposal last year itself. The act governing SBS will now be repealed, and any reference to SBS will be removed from the act governing SBI. SBI plans to merge with itself six other associate banks and attain a larger size ahead of the entry of global players into India. Some other advantages of a larger banking entity include larger reach, greater financial and manpower resources, better risk management and efficient processes.

    It is interesting to observe how consolidation within many industries tends to wax and wane in waves due to the need for economies of scale, greater reach and regulatory requirements. There have been several rounds of consolidation in industries such as metals, automobiles and telecom. At this point in time, the pharma industry is going through a great deal of merger activity. The Indian banking industry is also likely to witness a great deal of merger activity ahead of the opening up of the sector to foreign players as per the roadmap laid down by the Reserve Bank of India.

  • Also read - Impact of RBI's CRR and Repo rate hike

    Cars to stop attrition

    In a bid to control the high attrition rate among its ranks, public sector oil explorer ONGC plans to provide nearly 10,000 employees with cars. These cars in the range of Rs 700,000 to Rs 800,000 will be owned by ONGC but will available to the employees at all time. This move comes soon after providing mobile handset with connections as well as laptops to all its officers. While the company will be able to claim depreciation on these assets, the employees will feel at par with their private sector counterparts in the energy sector who often earn more because of the better pay scales prevalent there.

    It may be noted that ONGC admits that attrition among the middle to senior level staff is one of its key challenges as it is extremely difficult to replace the trained manpower that it loses to the private sector energy companies. What is interesting in this development is that is shows the changing mindset of the PSU employees, who now care for growth as against job security which used to be the most important factor earlier. It is also interesting to note that while recruitments and pay scales have contracted in many industries on the back of economy wide pressures, employees in the upstream energy sector are insulated given the record profits earned by the segment from the surging crude prices.

  • Also read - Performance across sectors in 1QFY09

    Inflation slightly lower at 11.89%

    The inflation figures for the week ended July 12, 2008 turned out to be marginally lower at 11.89% as against 11.91% in the previous week. The main reason for the decline was lower prices of selected food items like tea and edible oil.

    The RBI's review of the credit policy on July 29 assumes a great deal of significance in this context. At a time when India is gearing up for several state and national elections, the government is likely to take further measures to control inflation given the impact it has on electoral sentiments. However, the relentless rise in inflation numbers during the year has been on the back of a global surge in commodity prices. Hence, experts believe that domestic factors such as monsoon as well as measures like CRR and repo rate hike will have only a limited impact in containing inflation.

     

     

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