New Delhi: The Lok Sabha on 15 May approved changes in rules that will enable banking subsidiaries of the State Bank of India, the nation’s biggest, to raise fresh capital by selling shares.
State Bank’s units will be allowed to raise their authorized capital, split shares to increase trading and lift the ceiling on purchase of shares by individual investors, Finance Minister P. Chidambaram told lawmakers in New Delhi.
“The government can’t infuse additional money in these banks,” Chidambaram said, adding the banking subsidiaries will need Rs 31.6 billion ($773 million) to meet new capital rules from March.
Banks need more capital to finance growth, with India’s $854 billion economy expected to expand 10% by 2012 from 8.5% targeted for the year to March 31. India, the world’s fastest growing major economy after China, is estimated to have grown 9.2 percent in the year that ended March 31.
Indian banks need 500 billion rupees of capital this fiscal, Vinod Rai, banking secretary, said in New Delhi in April. Bank loans grew 28% in the year ended March 31 compared with 35% in the year ended March 2006 and the previous year.
State Bank of India, which has 100 million customers in a nation of 1.1 billion people, plans to sell up to $1.5 billion of shares by the year-end, Chairman Om Prakash Bhatt said in Kolkata on May 12.
The 200-year-old State Bank of India owns 75% stakes in State Bank of Bikaner & Jaipur and State Bank of Travancore and 92.33% of State Bank of Mysore. State Bank of Hyderabad, State Bank of Indore, State Bank of Saurashtra and State Bank of Patiala are not listed.
The seven banks had 4,755 branches, the most after State Bank, as of September last year and Rs 1.4 trillion of assets as of March 2004, according to the State Bank’s Web site.
The rule changes will have to be approved by the upper house of parliament and signed by the President of India to come into effect.