Lok Sabha unshackles State Bank associates

SBI Subsidiary Bank (Amendment) Bill cleared.

The Lok Sabha today passed a Bill allowing the State Bank of India to reduce holdings in its seven subsidiary banks to 51 per cent.

The State Bank of India (Subsidiary Bank Laws) Amendment Bill, 2006, which amends the State Bank of Saurashtra Act, 1950, the State Bank of Hyderabad Act, 1956 and the SBI (Subsidiary Banks) Act, 1959, was passed by a voice vote.

"The Amendment Bill will allow SBI to reduce its stake in subsidiary banks to 51 per cent from the existing 55 per cent," Finance Minister P Chidambaram said replying to a discussion on the bill.

The government would not reduce its holding in any public sector bank to below 51 per cent and retain a majority of voting rights, the minister said.

The amendment is intended to bring SBI subsidiaries at par with national banks and to raise capital for meeting Basel-II requirements. "The SBI group requires a capital infusion of Rs 3,161 crore to meet Basel-II norms. This capital cannot be infused by the government," he said.

Of the seven subsidiaries, the SBI has 100 per cent stake in State Bank of Hyderabad, State Bank of Patiala and State Bank of Saurashtra.

In the other four -- State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Indore -- SBI's stake varies from 75 per cent to 98 per cent.

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What the amendment does for the arms

Allows SBI to bring down holding to 51%

Paves way for raising capital through preferential share issue, private placement or public issue

Permits issuance of bonus shares

Removes restriction on individual shareholding

Increase in voting rights of shareholders other than SBI to 10 per cent from 1 per cent