Bill in LS to allow SBI to raise more capital from market

A bill, seeking to reduce Centre's shareholding in the State Bank of India (SBI) from 55 per cent now to 51 per cent and to allow the bank to raise more capital from the market through preference shares, was introduced in the Lok Sabha today.

Finance Minister Pranab Mukherjee moved the State Bank of India (Amendment) Bill, 2010, amidst slogan shouting by SP, RJD and BSP members against the women's reservation bill in its present form.

The bill's statement of objects and reasons said the legislation was aimed at allowing "reduction of shareholding of the Central government from 55 per cent to 51 per cent consisting of the equity shares of the issued capital".

It said the SBI Act, 1955, was amended in 1993 to enable the bank to access capital market. "While SBI can access capital market by issuing equity shares or bonds, or by both equity shares and bonds, there is no express provision under the SBI Act to enable the bank to issue preference shares and also bonus shares," it added.

"The amendment bill seeks to provide for enhancement of the capital of State Bank by issue of preference shares, to enable it to raise resources from the market by public issue or preferential allotment or private placement," it said.

"The bill also aims to provide for flexibility in the management of the bank," it added.

It will provide for increasing the authorised capital of the SBI to Rs 5,000 crore and enable the Central government to increase or reduce the authorised capital in consultation with the Reserve Bank of India.