SBI Caps (the investment banking arm of State Bank of India) has been asked by the Finance Ministry to undertake a study on the merger and recapitalisation of banks.

“We have given them (SBI Caps) two assignments. One is on recapitalisation and the other on bank consolidation. I hope within a month or so we will be getting something,” Financial Services Secretary GS Sandhu told newspersons on the sidelines of Finance Minister Arun Jaitley’s meeting with public sector bank chiefs here on Thursday.

Sandhu said though the Ministry had received many suggestions in this regard, it is yet to receive a formal proposal. He said work was on for merger of one of five associate banks of SBI with the parent organisation.

Sandhu also said that reduction of Government holding in SBI and 19 nationalised banks was more likely to happen in tranches. Although, according to regulation, Government holding in public sector banks should not go below 51 per cent, in practice the effort is not to reduce Government stake below 58 per cent.

“We will go to the Cabinet. We will apprise the Cabinet. We will take a nod from them... It will be a combination of follow-on public offer and, in some cases,qualified institutional placement, and some will be retail,” he said.

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