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Rediff.com  » Business » FII cap in SBI may be raised

FII cap in SBI may be raised

March 11, 2003 12:55 IST

The finance ministry is considering a proposal to hike the cap on foreign institutional investors' holding in the State Bank of India.

"We are considering the proposal of increasing the foreign institutional investors' holding limit in the State Bank of India. An announcement is likely in a couple of months," said Minister of State for Finance Anandrao V Adsul, on the sidelines of the launch of United Bank of India's mobile banking service.

Government officials close to the development said SBI was seeking to delink the global depository receipt holding of the bank from that of foreign institutional investors.

This will increase the ceiling on the latter. At present, the GDR holding in the bank is 7.89 per cent. This, along with foreign institutional investment, totalled 19.84 per cent. The permitted limit of foreign institutional investors' holding in the State Bank of India is 20 per cent.

Delinking the GDR holding will create an 8 per cent gap for foreign institutional investment.

The hike in the cap on foreign institutional investors' holding will require an amendment to the State Bank of India Act, and the government wants to weigh the pros and cons before going ahead.

It has ruled out any amendment to the State Bank of India Act before the Banking Amendment Bill is passed.

The Banking Bill seeks to reduce the government's equity in public sector banks to 33 per cent. At present, the Reserve Bank of India's holding in the State Bank of India is at 59.73 per cent.

The Budget for 2003-04 raised the foreign investment limit in private banks to 74 per cent. It also announced that the cap on voting rights, at present restricted to 10 per cent irrespective of the shareholding, would be removed in the case of private banks.
Debjoy Sengupta in Kolkata