SBI for issue of no-vote shares

Govt's decision on proposal to apply to all PSBs.

The State Bank of India (SBI) plans to issue shares with restricted or no voting rights for subscribers to its public issue, estimated to be Rs 6,000 crore, that is slated to hit the market this financial year.

The bank has already submitted a proposal to the government, which will require amendments to the SBI Act.

While the bank did not respond to a faxed questionnaire, official sources said the objective of the proposal was to raise capital without affecting the ownership of the government or public sector institutions. Government ownership in public sector banks cannot fall below 51 per cent.

The shares with differential voting rights have been proposed for all classes of investors, including foreign institutional investors (FIIs).

Holders of such shares will be entitled to economic rights such as claim on dividend or bonus but restricted or no voting rights.

Such a separate class of shares is prevalent overseas where funds are raised via shares with economic rights but no voting rights.

Under restricted voting rights, 50 or 100 shares would constitute one vote, against the usual norm of one share for one vote.

Ministry sources said the government's decision on this proposal would be applicable not only to SBI but all public sector banks.

At present, the RBI holds a 59.7 per cent stake in SBI on behalf of the government, which is to be transferred to the government in July. The other shareholders of the bank include FIIs with a 20 per cent stake, the public with 6 per cent and financial institutions with the rest.

FIIs currently hold SBI shares in the form of global depository receipts (GDRs). Under the Foreign Exchange Management Act, GDR holders do not have any voting rights unless they prefer to exercise the option of converting their GDRs into shares.