Sbi Associates Act Alteration On Cards

The State Bank of India Subsidiary Banks Act may be amended to allow associate banks of SBI to go public by making two critical changes: reducing the face value of each share of the subsidiary banks from Rs 100 to Rs 10 and doing away with the present limit of 200 shares per shareholder.

It is expected that the structure of the bank and the relation of the associate banks vis-a-vis SBI will not change.

The parliamentary panel looking into the matter is likely to propose the amendment without upsetting the structure, despite four clear alternative models having come up for discussion.

Now, three of the seven SBI subsidiaries are 100 per cent owned by the bank, while the rest have SBI holdings varying between 97 and 98 per cent.

While one model prescribed the retention of the present structure, another proposal put forward by international consultants McKinsey and Co, who also advised SBI on its own restructuring, envisaged the merger of all the subsidiaries with SBI. SBI chairman P G Kakodkar said this move would have enabled the bank to consolidate its position further in several regions.

For example, if the State Bank of Travancore branch network was merged with that of SBI, it would have enabled the latter to create a separate circle in Kerala. Similarly, if the State Bank of Bikaner and Jaipur (SBB&J) network was merged with SBI's zonal office in Rajasthan, another circle could have been created.

Yet another proposal envisaged merging the seven banks into one, which would be number two in size and network to SBI.

Kakodkar said, the setting up of the corporate accounts group (CAG), where important corporate accounts are exclusively serviced by a high-powered outlet, was also part of the recommendations by McKinsey.