Shareholding Talk Cranks Up State Bank

Shares of State Bank of India today witnessed a sharp rise on rumours that the bank is likely to receive government nod to relax restrictions in its shareholding pattern.

The stock rose 5.84 per cent to Rs 199.45 slightly off its intraday high of Rs 200.45 on the Bombay Stock Exchange.

At present, there are two restrictions on the shareholding of the bank. The first restriction is the Reserve Bank of India's stake, which is currently 59 per cent, cannot fall below the 55 per cent. The second norm is: the ceiling for foreign institutional investors' (FII) holding in the bank should be 20 per cent.

Dealers said a relaxation in either of these restrictions could improve the stock's liquidity. They maintained that this could be the reason behind the today's rise.

However, certain analysts said the central bank RBI was expected to give permission to foreign institutional investors to further buy 2 per cent of the equity in the bank.

According to the RBI guidelines, the FII buying is halted when the FII holding reaches 18 per cent, 2 per cent short of its 20 per cent ceiling. The central bank had suspended further purchases by FII / persons of Indian origin/ overseas corporate bodies on May 23, 2001.

An analyst from a domestic brokerage said talks of relaxation of norms have been going on for quite some time, but there has been no official announcement as yet. So, the rise in the bank's scrip is purely on value-buying, they said.