Govt works on cash-neutral transfer of SBI holding

Close on the heels of the Cabinet's approval for the SBI (Amendment) Bill, the finance ministry is giving finishing touches to a unique cash-neutral transaction between the government and the Reserve Bank of India (RBI) for the latter's 59.73 per cent stake in the country's largest commercial bank.

The Union Cabinet had yesterday cleared the decks for a follow-on public issue of equity shares by the bank, through its nod to the SBI (Amendment) Bill.

The amendment proposes to lower the floor for the RBI's holding in SBI to 51 per cent from 55 per cent. Following an amendment to the RBI Act a few weeks back, the banking regulator's stake in SBI is set to be transferred to the government.

With the amendment of the SBI Act, the government will have a uniform stake of 51 per cent in all public sector banks.

According to sources close to the development, the transfer of SBI's shares was not going to have any impact on the fisc, though the government would not be offered any discount on the SBI's market price.

At today's closing price, SBI's market capitalisation works out to Rs 47,560 crore. The government will have to shell out Rs 28,410 crore for buying the RBI's stake. The SBI stock gained 3.39 per cent today to close at Rs 903.75 on the Bombay Stock Exchange.

"The RBI's stake will not be transferred to the government for free, and the government will have to pay the market price. However, it will get back the money in the form of dividends from the RBI," said a source in Delhi.