Govt to cut stake in SBI...tables bill in LS

The Government introduced a bill to amend the State Bank of India Act in parliament and is seeking approval to allow SBI to sell preference shares and reduce its holding in the bank to 51%. The bill’s statement of objects and reasons said that the legislation was aimed at allowing "reduction of shareholding of the Central Government from 55% to 51% consisting of the equity shares of the issued capital." The SBI Act, 1955 was amended in 1993 to enable the bank to access capital market. While SBI can access capital market by issuing equity shares or bonds, or by both equity shares and bonds, there is no express provision under the SBI Act to enable the bank to issue preference shares and also bonus shares, it added.

"The amendment bill seeks to provide for enhancement of the capital of SBI by issue of preference shares, to enable it to raise resources from the market by public issue or preferential allotment or private placement," the Bill said. "The bill also aims to provide for flexibility in the management of the bank," it added. The Bill will provide for increasing the authorised capital of SBI to Rs50bn and enable the Central Government to increase or reduce the authorised capital in consultation with the Reserve Bank of India (RBI). The passage of the bill will give SBI the headroom to raise more equity capital. At the current price, this would mean a mobilisation of Rs200bn. SBI will need to raise nearly Rs400bn over the next five years to maintain growth momentum, according to chairman OP Bhatt.