RBI146;s stake in SBI set to fall

In a move that will allow State Bank of India to access the capital markets and enable Reserve Bank of India to reduce its 55 per cent stake in the bank to 51 per cent, the Union Cabinet today cleared an Amendment Bill to the State Bank of India Act, 1955.

In a move that will allow State Bank of India to access the capital markets and enable Reserve Bank of India to reduce its 55 per cent stake in the bank to 51 per cent, the Union Cabinet today cleared an Amendment Bill to the State Bank of India Act, 1955.

8216;8216;We will try to introduce it in Parliament tomorrow, else it will have to be tabled in the next session,8217;8217; said Priyaranjan Dasmunshi, Union minister for Parliamentary affairs.

The amendments would also increase the authorised capital of SBI from Rs 20 crore to Rs 5,000 crore so as to take care of the bank8217;s future needs.

The bank8217;s board would be empowered to reduce the nominal or face value of its shares and divide the authorised capital into such denomination as the Board may decide with RBI approval.

Another amendment enables SBI to issue preference shares, increase the issued capital either by public issue, preferential allotment or private placement.

SBI would also be able to issue bonus shares to existing equity share holders. SBI would also now be able to make call on fresh issue of capital in installments with the power to forfeit unpaid shares and re-issue them. The reduction in RBI8217;s stake would help SBI attract a large number of small investors and provide liquidity to the stock. However, the Act would cap the RBI stake at 51 per cent instead of the current 55 per cent.

A long-standing demand of shareholders to allow them to nominate their shares to another person, in the event of the shareholder8217;s death, has also been cleared.

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Some changes have been cleared on the personnel front too. Sources informed The Indian Express that the number of managing directors in SBI, presently limited to two, has been increased. With the amendment, SBI can now have 8216;no more than four8217; managing directors.

The vice-chairman8217;s post, not been filled for many years now, will cease to exist. All references to the post in the SBI Act would be deleted. On the corporate governance front, the changed law would empower the RBI to appoint additional directors in the interest of banking policy or in public interest, if and when RBI feels the need. Moreover, any SBI shareholder with shares of a nominal value of at least Rs 5,000 can contest the election for directorship on the bank8217;s board.