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Sarbajeet K. Sen

New Delhi , April 7

IN what would come as a dampener to foreign institutional investors (FIIs) hoping to corner a larger pie of State Bank of India (SBI) shares, the Ministry of Finance has decided that the bank's American Depository Shares (ADS) and Global Depository Receipts (GDRs) would continue to remain part of the 20 per cent foreign investment ceiling.

The Ministry feels that the restrictions would have to continue until broader amendments to the SBI Act are undertaken to allow the RBI's minimum shareholding in the bank to come down from the present 55 per cent.

"We have taken a decision that GDR and ADS would continue to be part of the 20 per cent foreign investment cap for SBI. We can review the decision once a view is taken on RBI's holding in the bank," top Finance Ministry officials told Business Line.

RBI was earlier keen on divesting its shareholding in entities that it regulates. The Government, however, is yet to take a final view on the modalities of the central bank's exit from SBI as its promoter. Removing ADS/GDR from the 20 per cent ceiling would have provided more leeway for FIIs to buy into the shares of SBI. Officials said that the decision to retain the status quo was taken in view of the limited public float available for the SBI stock. "Taking out ADS/GDR would have led to FIIs buying into the public shareholding, which itself is not much," the officials said.

RBI presently holds 59.73 per cent in SBI, while foreign investment has hovered close to 20 per cent, including nearly 8 per cent GDR/ADS. The remaining 20 per cent is split between mutual funds, Unit Trust of India, banks and financial institutions, insurance companies, non-governmental institutions, NRIs, overseas corporate bodies and the public. The holding by the Indian public has hovered between 6 and 7 per cent.

The move not to alter the SBI cap is in keeping with the Government's unwillingness to tamper with the 20 per cent foreign investment restriction in public sector banks, including nationalised banks. There have been speculations that the Government was moving towards hiking the foreign investment limit beyond 20 per cent. "There is no such move," the officials said.

The SBI scrip closed at Rs 655.20 on Thursday, up 0.54 per cent from the previous day's close of Rs 651.70. The share has seen a 52-week high of Rs 750.70 on March 7, 2005 and a 52-week low of Rs 390 on July 9, 2004.

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