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SBI asks govt to go slow on merger of associate banks

Sidhartha in New Delhi | May 31, 2004 08:56 IST

The State Bank of India has advised the government to go slow on the merger of its seven associate banks but has recommended amendments to the law governing these banks to allow them to raise capital from the markets easily. 
Senior government officials told Business Standard that the finance ministry was processing a set of amendments to the SBI Subsidiaries Act for placing them in Parliament. 
"They have, however, said that they are not keen on the merger of associate banks since the issue needs to be debated at length before a final decision is taken," an official said. 
While the SBI is internally debating the proposal, the government has decided to postpone the amendments to the SBI Act too for the time being. 
The proposed amendments included transferring the Reserve Bank of India's stake in the bank to the Centre, reducing the floor for government holding in the bank from the present 55 per cent and amendments to exclude ADR/GDR holdings from the foreign institutional investor stake. 
Among the amendments proposed by the SBI and being processed by the finance ministry is a proposal to allow SBI's subsidiaries to go for a stock split. 
SBI subsidiaries are mandated to issue equity shares with a face value of Rs 100. They have now sought amendments to enable them to issue shares with a face value of Rs 10 or less. 
In addition, the norms for individuals holding shares of SBI subsidiaries are also proposed to be simplified. The voting right cap of 1 per cent, irrespective of the holding, is expected to be eased for individual investors though a decision on the new cap has not been taken at present. 
Similarly, individual investors can hold more than 200 shares of any SBI subsidiary once the law is amended. 
SBI is keen that the amendment Bill is placed before the Union Cabinet for its clearance at the earliest. 
It had also proposed that the cap on SBI holding in the subsidiaries, presently at 55 per cent be eased, but the finance ministry has turned down the offer as most of the subsidiaries have not tapped the markets so far.

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