SBI Amendment Bill to be tabled in Parliament

The Union Cabinet on Thursday cleared the State Bank of India (Amendment) Bill for introduction in the current session of Parliament.

Among other things, the Bill seeks to bring down the government’s holding in State Bank of India (SBI) from the current 59.4% to 51%, on a par with other public sector banks.

The government had in 2006 presented to Parliament a Bill to permit a reduction in its shareholding in SBI to up to 51%, but it lapsed in 2009.

The Bill also provides for increasing SBI’s authorised capital from `20 crore to `5,000 crore, raising capital by preferential allotment or by private placement, issuing bonus shares, allowing reduction of government’s shareholding from 55% to 51% and restricting the voting rights of those holding preference shares.

Experts see this as a good move, which could pave way for the bank to expand its capital base, through a follow-on public offer or a rights issue, or some other route.

“Fifty-one percent seems to be equated with the other public sector banks’ holdings. It is a good move, but I think it’s a signal that for all the future capital requirements, do not look forward to the government,” said Robin Roy, associate director, PriceWaterhouseCoopers.

Suresh Ganapathy, head of financial research team, Macquarie Securities said the Bill merely gives the government the power to reduce its stake. However, the government would like to maintain its stake at 59.4%, he said, adding, “If they had any intention, they could have brought down the same to 55% from the present 59.4% but they haven’t done anything as such. It is a positive, but the government is unlikely to reduce its stake.”

At present, the stake of the promoter — the government — cannot fall below 55%.