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Our Bureau

Move gives `little more headroom' for raising capital

New Delhi May 15 The Lok Sabha on Tuesday cleared the decks for the seven subsidiary banks of State Bank of India to approach the capital market for raising resources to fund business growth and also meet the Basel-II norms on capital adequacy.

The House cleared the State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2007, that seeks to lower the minimum shareholding of SBI in its seven subsidiary banks to 51 per cent, provide more autonomy to the boards of these banks, allow these banks to issue preference shares and ensure the presence of a RBI nominee on their boards.

The Bill was passed by voice vote after incorporating about 13 amendments moved by the Finance Minister, Mr P. Chidambaram.

The seven subsidiary banks of SBI are State Bank of Bikaner & Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Saurashtra, State Bank of Indore, State Bank of Mysore and State Bank of Hyderabad.

Panel proposals

The amendments mainly pertained to the suggestions made by the Standing Committee on Finance. The Government has accepted five suggestions of the Standing Committee and brought in appropriate amendments to the Bill.

Currently, the law stipulates that the SBI should hold at least 55 per cent stake in each of the seven subsidiary banks.

"There is nothing in the Bill that either restricts the autonomy or takes away the public sector character of the subsidiary banks," Mr Chidambaram assured members of Lok Sabha today.

Asked as to what was the urgency for scaling down the minimum shareholding of SBI in these banks, Mr Chidambaram said that this would bring the subsidiary banks of SBI on par with the nationalised banks as regards the 51 per cent holding and also give "little more headroom" for raising capital.

He highlighted that the UPA Government would ensure that the public sector character of the nationalised banks is preserved and hold at least 51 per cent in all nationalised banks.

Mr Chidambaram added that the Government would acquire RBI's stake in SBI by July or August. After the acquisition, the Government would indirectly own the seven subsidiary banks of SBI.

Other amendments

The other amendments that form part of the amended Bill include granting of power to the Chairman of SBI to nominate an official of the State Bank or of the subsidiary bank to be a whole-time Chairman of the subsidiary bank. At present, the SBI Chairman is the ex-officio chairman of all the subsidiary banks.

The Bill has also been amended to enable the subsidiary banks to hold their board meetings through video conferencing.

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

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