Government tables SBI Bill in Lok Sabha

The government today introduced the State Bank of India (Amendment) Bill in Parliament to give SBI more leeway to raise capital from the market through preference shares, bonus shares and private placement of shares. The Bill proposes to bring down the minimum government shareholding in the country’s largest bank to 51 per cent from the 55 per cent prescribed in the existing law.

The Bill, presented by Finance Minister Pranab Mukherjee in the Lok Sabha, proposes to increase the authorised capital of SBI to Rs 5,000 crore, enabling the government to increase or reduce it in consultation with the Reserve Bank of India.

“The Bill proposes to amend the SBI Act to allow the issued capital of the State Bank to be raised by preferential allotment of shares or private placement or public issue or rights issue,” the finance minister said while introducing the Bill.

At present, the Centre holds 59.41 per cent in SBI. The bank does not have much headroom to raise capital by diluting the government’s equity. The Bill, when passed, would bring SBI on a par with other public sector banks, where the minimum government holding is 51 per cent.

The SBI Act, 1955, was amended in 1993 to enable the bank to access the capital market. A Bill was introduced in Parliament in December 2006 but lapsed due to the dissolution of the 14th Lok Sabha. The Bill tabled today is broadly on the lines of the lapsed one, but incorporating some suggestions of the Standing Committee.

While SBI can access the capital market by issuing equity shares and bonds, there is no provision under the existing SBI Act to enable the bank to issue preference shares and bonus shares.

The Bill’s statement of objects and reasons said the legislation was aimed at providing flexibility in the management of the bank. Once cleared, it would empower the government to appoint up to four managing directors, abolish the post of vice-chairman, and enable shareholders with at least Rs 5,000 worth of shares to contest the election for directorship.

SBI’s stock rose 1.16 per cent, or 23.8 points, to Rs 2,070.25 on the Bombay Stock Exchange. The Bankex rose 1.09 per cent whereas Sensex was up 0.61 per cent.