State Bank of India is contemplating to hike its stake in the Multicommodity Exchange by 8 per cent, taking the group's aggregate holding to 18 per cent.

The rise in holding will be via the participation of SBI's associate banks, said banking sources. SBI officials, when contacted, said that the proposal is under process and will take time.

SBI has already picked up 10 per cent stake in MCX. Each of the associate banks will have to seek board approval to pick up the additional stake.

This is because each bank is an independent entity and will have to decide on the strategic investment from its own shareholders' point of view. Earlier, MCX had divested 8 per cent stake to four other public sector banks on June 1, 2004.

Corporation Bank, Union Bank of India, Bank of India and Canara Bank had picked up a 2 per cent stake each for Rs 42 lakh (Rs 4.2 million). Increasing its holding in MCX will help SBI actively participate in the rural sector.

As a policy, SBI always forays into new areas as a group, which helps it utilise the mutual expertise in the area of activity. SBI also offers its associate banks the opportunity to exploit the group synergy and shift to new areas of activity.

While SBI is keen to be an active participant in the commodity exchange, current RBI norms prohibit banks to trade in commodities and commodity futures with the exception of bullion.

Incidentally, the central bank has pushed for an amendment to the same and is awaiting a Parliament ratification.

Meanwhile, the proposal to merge the associate banks with SBI has been dropped since each one of them cater to a niche market and are faring well, said sources.