Our Bureau

New Delhi, Dec. 14

The Standing Committee on Finance has endorsed the proposed legislative amendment to reduce State Bank of India's shareholding (statutory minimum) in its subsidiary banks from the current 55 per cent to 51 per cent.

In its report on the State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2006, the Standing Committee noted that the proposed legislative changes would enable the subsidiary banks to raise capital through preferential allotment or private placement.

It would also enable them to issue preference shares in line with the guidelines framed by the Reserve Bank of India (RBI). As per the existing provisions, the subsidiary banks can raise capital only through public issue of equity shares.

Providing headroom

The proposed reduction of SBI's shareholding from 55 per cent to 51 per cent was aimed at providing more headroom to the subsidiary banks to raise capital from the market without the necessity for infusion of capital by SBI and also without diluting their public sector character.

The Standing Committee noted that the proposal to reduce the minimum shareholding of SBI in subsidiary banks to 51 per cent would in a way place these banks at par with the nationalised banks, where the Government's minimum shareholding has been pegged at 51 per cent.

While the entire capital of State Bank of Hyderabad, State Bank of Patiala and State Bank of Saurashtra is currently held by SBI, the remaining four subsidiary banks have private shareholdings, in addition to the shares held by SBI.

The shares of these four subsidiary banks - State Bank of Bikaner & Jaipur, State Bank of Indore, State Bank of Mysore and State Bank of Travancore - are listed in the stock exchanges.

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(This article was published in the Business Line print edition dated December 15, 2006)
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