The Hindu Business Line : Bill in LS to enable SBI to cut stake in subsidiaries

A Bill that would facilitate reduction of State Bank of India's (SBI) shareholding in its seven subsidiary banks from 55 per cent to 51 per cent was introduced in the Lok Sabha today.

The Bill, which was introduced by the Union Finance Minister, Mr P. Chidambaram, also seeks to enable the seven subsidiary banks of SBI to raise resources from the market. It would also relax the restrictions hitherto faced by the shareholders of the subsidiary banks in terms of free transferability, individual holding of shares and their voting rights.

The seven subsidiary banks of SBI that are to be impacted by the Bill are: State Bank of Saurashtra, State Bank of Hyderabad, State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Indore, State Bank of Mysore and the State Bank of Travancore.

Amendment Bill

The State Bank of India (subsidiary banks laws) Amendment Bill 2006 seeks to amend the State Bank of Saurashtra Act, 1950, the State Bank of Hyderabad Act 1956 and the State Bank of India (subsidiary banks) Act to increase the authorised capital of the subsidiary banks to Rs 500 crore each.

It would also allow the subsidiary banks to raise issued capital by preferential allotment or private placement or public issue in accordance with the procedure as may be specified by regulations made by SBI with the approval of RBI and to issue preference shares in accordance with the guidelines framed by RBI.

Voting rights

The Bill also provides for nomination facility in respect of shares held by individual/joint shareholders of the subsidiary banks. Besides removing the restriction on individual shareholdings in excess of 200 shares, the Bill also facilitates increase in the percentage of voting rights of shareholders (other than the SBI) from one per cent to 10 per cent of the issued capital of the subsidiary bank concerned.

Moreover, the voting rights of preference shares of subsidiary bank are to be restricted only to resolutions directly affecting their rights. The preference shareholder would also be restricted to exercise voting rights in respect of preference shares held by him to a ceiling of 10 per cent of total voting rights of all the shareholders holding preference share capital only.

More Stories on : Financial Policy | Public Sector Banks | State Bank of India

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