SBI stakes in arms may fall

Cabinet yesterday approved a draft amendment to the SBI (Subsidiary Bank) Act, 1959.

The Cabinet today approved a draft amendment to the SBI (Subsidiary Bank) Act, 1959, which allows State Bank of India (SBI) to reduce its stake in its seven banking subsidiaries to 51 per cent.

The current floor for SBI's stake in its subsidiaries is 55 per cent. SBI currently owns between 74 and 100 per cent of its seven subsidiary banks.

Commerce Minister Kamal Nath told reporters that the SBI Subsidiaries Amendment Act had been approved by the Cabinet. The Cabinet also approved the Banking Regulation (Amendments) Bill 2005, which accords greater operational flexibility and regulatory powers to the Reserve Bank of India.

The proposed amendment also seeks to remove the ceiling of 200 shares on individual shareholding in SBI subsidiaries, raise the cap on voting rights to 10 per cent from 1 per cent and increase their authorised capital to Rs 500 crore from the current Rs 100 to Rs 200 crore.

The shares of the three listed SBI subsidiaries "" State Bank of Bikaner & Jaipur, State Bank of Mysore and State Bank of Travancore "" hit the upper circuit following the announcement that the Cabinet had approved the draft of the SBI Subsidiaries Amendment Act.

Share prices of State Bank of Mysore rose by 20 per cent to Rs 5,481.40, State Bank of Travancore by 5 per cent to Rs 3,654 and State Bank of Bikaner by 5 per cent to Rs 3,690.55. The draft Bill will now be tabled in the next session of Parliament for approval.

Analysts see the amendment of the SBI Subsidiaries Act as a precursor to an amendment to the State Bank of India Act to bring down the floor of the RBI's stake in the country's largest bank to 51 per cent from 55 per cent. The RBI currently holds 59.73 per cent in SBI. SBI shares closed up 3 per cent at Rs 978 on the Bombay Stock Exchange.

The other four SBI subsidiaries are State Bank of Patiala, State Bank of Indore, State Bank of Hyderabad and State Bank of Saurashtra.