SBI gets right to reduce stake in subsidiaries to 51%

NEW DELHI: The government will give the State Bank of India, India’s biggest bank, the freedom to reduce its stake in its subsidiaries to 51% through a bill proposed to be introduced in parliament during the budget session.

The move will enable SBI to raise capital and boost its own operations. The finance minister in his budget speech on Monday announced that State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2009 will be introduced soon.

SBI is the country’s largest bank with 20% market share and plans to tap the capital market to raise Rs 20,000 crore through rights issue.

"This will give SBI the flexibility to raise funds for its associates banks rather than infusing capital all by themselves. However, it is unlikely that SBI will opt for this option for its associate banks, specially the unlisted banks, since it is in consolidation mode," said Naresh Takker, MD and CEO of Icra .

SBI has a number of associate banks in different parts of the country. In the past few years, it has been merging some of these subsidiaries such as State Bank of Indore and State Bank of Saurashtra with itself in the past three years.

Three other associates are listed such as State Bank of Bikaner & Jaipur, State Bank of Travancore where it holds 75% and State Bank of Mysore , where it holds 92%. In the remaining two banks - State Bank of Hyderabad and State Bank of Patiala SBI holds 100% stake.

Source: EconomicTimes