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Govt will stand by SBI's capital-raising efforts

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`Stake in PSBs will not be below 51 pc'

MR P. CHIDAMBARAM
MR P. CHIDAMBARAM

Our Bureau

New Delhi, Dec 8

The Finance Minister, Mr P. Chidambaram, on Friday said that the transfer of Reserve Bank of India (RBI) shareholding in State Bank of India to the Government would not in any way adversely impact the bank's capital-raising ability.

He told the Lok Sabha that the Government had agreed in principle to acquire the RBI's shareholding in SBI and was close to reaching a final decision on the transaction. Currently, the RBI holds 59.73 per cent stake in SBI.

"SBI has a comfortable capital adequacy of 12.63 per cent, as on September 30, well above the minimum regulatory environment of nine per cent. The apprehension that the transfer would impair fresh capital-raising is unfounded," Mr Chidambaram said. He also said that the Government would fully stand by SBI in its efforts to raise more capital.

The bank has a number of avenues, irrespective of ownership, to strengthen its capital - raising fresh equity, issue of innovative perpetual debt instruments eligible for inclusion as tier-I capital, issue of various capital instruments to shore up tier II capital, etc.

The Finance Minister also said that the Government would retain majority shareholding of at least 51 per cent in SBI whenever the transfer would happen.

The Government would continue to hold 51 per cent and above shareholding in all public sector banks and there was no question of bringing any legislation to allow Government shareholding to go below that level.

(This article was published in the Business Line print edition dated December 9, 2006)
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