Move to dilute govt stake in SBI | india | Hindustan Times
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Move to dilute govt stake in SBI

The Union Government has decided to dilute its equity in the State Bank of India (SBI) to 51 percent from 59.73 per cent. This decision of the Union cabinet will have to be cleared and approved by Parliament as the bank was created by an Act.

india Updated: Aug 25, 2006 14:21 IST

The Union Government has decided to dilute its equity in the State Bank of India (SBI) to 51 percent from 59.73 per cent. This decision of the Union cabinet will have to be cleared and approved by Parliament as the bank was created by an Act.

If cleared by Parliament, the centre will have two ways to go about diluting its stake: It can either offload 8.73 percent of existing equity in the domestic market or issue fresh equity through.

While moving the proposl before the cabinet on Thursday, Finance Minister P.Chidambaram argued that dilution of centre's holding would enhance public participation in SBI's equity capital. It will also help in the restructuring of SBI.

Currently, the retail investors hold only 6.53 percent equity in SBI while foreign institutional investors  own 11.9 per cent apart from Bank of New York - Depository at 7.88 percent. The other major equity holders are mutual funds & UTI (5.07 per cent), Corporates (2.33 per cent) and NRIs/OCBs (0.05 per cent).

As part of the restructuring plan, the Government has also allowed the SBI to access the capital markets to raise equity, issue preferential shares through private placement and comply with the Basel II norms.

It has also allowed the SBI to issue bonus shares to existing shareholders, hitherto not possible. And SBI shareholders will now be able to name their successor to take over their shares after their death.