A day after the Union Cabinet cleared a proposal allowing the State Bank of India (SBI) to access the market — enabling the Reserve Bank of India (RBI) to cut its stake in SBI from 59.73% to 51% — shares of the largest commercial bank in the country shot up by 3.39% to Rs 903.75 in a firm Dalal Street.It’s not without reason. “The proposed amendment in the SBI Act is good news for investors. After the Bill is passed, one can expect a public offer or bonus issue or sub-division of shares. It is to be seen how they will handle the equity dilution,’’ says BSE broker Pawan Dharnidharka.Analysts say the latest move could be the first step towards transferring the RBI stake in SBI to the government.According to Ambarish Baliga, vice president, Karvy, fresh issue of equity shares is the best way to do it. “A fresh issue will increase the cash flow of the bank. However, considering the government’s fiscal requirements, the government may opt for offloading of the existing stake,” he said. However, even in the case of offloading of existing stake, the money will come to the RBI coffers and not to the government. “If the money has to reach the government, the RBI holding needs to be transferred to the government. This may require changes in the Act,” Baliga said. In fact, SBI is the only PSU bank which is outside the purview of the government’s direct ownership. However, chairman and MDs of the bank are decided by the government.Minister of State for Finance S. S. Palanimanickam had told the Rajya Sabha last month that the RBI proposal for the transfer of its entire shareholding in SBI, Nabard and National Housing Bank is under consideration of the Finance Ministry.This proposal is based on the the recommendation of the Narasimham Committee which had said that it would be appropriate for the Reserve Bank of India not to own the institutions it regulates. The transfer would enable RBI to concentrate more on its regulatory and supervisory functions. If the government is to pay for the 59.73% RBI stake, it will have to shell out around Rs 28,656 crore based on the current market capitalisation. “It’s not feasible for the government to transfer this huge money at this stage. It could be done through an issue of securities or bonds to tackle this problem,” said a banking analyst.The market is not expecting any immediate public offer from SBI. First the government needs to sort out the stake ownership issue of SBI. “The Cabinet decision shows that some move is expected on this front soon,” the analyst added.
