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The Centre's participation in State Bank of India's proposed rights issue will come only through cash and not through any marketable Government securities, a top Finance Ministry official has said.
The rights issue size is being firmed up, but the Government's intent is to subscribe to the shares only in cash, Mr R. Gopalan, Secretary in Department of Financial Services said here.
The plan to go in for cash contribution is in variance with an earlier strategy when the Centre pumped in nearly Rs 10,000 crore through bonds for SBI's rights offering in 2008.
Mr Gopalan said that the timing of the proposed rights issue is not that important, but indicated that the priority would be to find the money required to invest in the rights offering.
The Centre has 59.4 per cent stake in State Bank of India, the country's largest commercial lender.
The Centre has in recent years opted against “below-the-line” expenditure and gone in for cash payments even for certain big ticket items like compensation to oil marketing companies.
Contribution for SBI rights offering would now be another instance when “below-the-line” route will not be adopted.
The SBI Chairman, Mr O.P. Bhatt, had last month said that the bank was looking to raise Rs 25,000 crore by selling shares by end-March 2011. If the rights offering size is finalised at, say, Rs 25,000 crore, then the Centre would be required to make cash contribution of Rs 14,850 crore to maintain its stake of 59.4 per cent in SBI.
The Centre would also have the option of not fully participating in SBI rights offering as the minimum statutory holding is now pegged at 51 per cent.
Parliament had in August passed the State Bank of India (Amendment) Bill-2010 to reduce the statutory minimum shareholding of the Central Government in the bank to 51 per cent from 55 per cent, among other things.
The Finance Minister, Mr Pranab Mukherjee, had then said that the reduction in Centre's statutory minimum shareholding to 51 per cent was only an enabling provision.
“Bringing down the statutory minimum shareholding to 51 per cent does not mean that tomorrow shares of SBI are likely to be offloaded by the Centre to 51 per cent. If it is necessary, it will be done. Under no circumstances will the public sector character (of the bank) will be diluted,” Mr Mukherjee had told Parliament in August last year.
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