The Union Cabinet today cleared the decks for a follow-on public issue of equity shares by State Bank of India, the country's largest commercial bank, by giving its nod to the SBI (Amendment) Bill. |
The amendment proposes to lower the floor for the Reserve Bank of India's (RBI) holding in SBI to 51 per cent from 55 per cent. The RBI now holds a 59.73 per cent stake in State Bank. |
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The lowering of the floor for the RBI stake will create ample headroom for the bank to hit the capital market with a follow-on offer. |
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A government statement said, "The SBI (Amendment) Bill will enable the bank to attract a large number of small individual investors." |
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SBI Chairman OP Bhatt was not available for comment on the development. The bank's stock closed 1.33 per cent up at Rs 874.10 on the Bombay Stock Exchange today. Tomorrow being the last day of the current session, the Bill will be placed before the floor of Parliament at its next session. |
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The State Bank of India (Amendment) Bill also proposes to allow the bank raise Rs 5,000 crore of capital through issue of preference shares. This will help the bank meet capital adequacy needs for growth, and also be prepared for implementing the revised capital adequacy norms, which are referred to as Basel II. |
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The bank's capital adequacy at the end of June 2006 was 11.97 per cent, against the minimum requirement of 9 per cent. The implementation of Basel II norms is estimated to reduce the capital adequacy of banks by about 2 percentage points. |
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The proposed amendment also provides for doubling the number of managing directors at SBI to four from two. With this, the number of whole-time directors on the board of SBI will go up to five. |
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