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Business News/ Politics / Policy/  SBI Capital to submit report on bank capitalization next month: Govt
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SBI Capital to submit report on bank capitalization next month: Govt

The report is part of the government's efforts to find a long-term solution for capital requirements of state-run banks

Financial services secretary G.S. Sandhu added that the department of financial services will go to the cabinet to get approval for government stake dilution in state-run banks. Photo: Ramesh Pathania/MintPremium
Financial services secretary G.S. Sandhu added that the department of financial services will go to the cabinet to get approval for government stake dilution in state-run banks. Photo: Ramesh Pathania/Mint

Investment bank SBI Capital Markets Ltd, an arm of the State Bank of India (SBI), is expected to submit reports on bank capitalization and consolidation in the next one month, financial services secretary G.S. Sandhu said on Thursday.

SBI Capital Markets’ report is part of the government’s efforts to find a long-term solution for capital requirements of state-run banks and start the process of mergers between small and big banks.

“We have asked SBI Caps to do a study...We have given them two assignments. One is on the recapitalization and other on bank consolidation. I hope within a month or so we will be getting something," he said on the sidelines of a meeting with chiefs of state-run banks.

He added that the government is yet to receive any formal proposal with regard to bank mergers.

“No formal decision has been taken but many suggestions are coming. One, of course, the State Bank of India (SBI) with one of their subsidiaries," he said.

SBI is expected to kick off the merger process by merging one of its subsidiaries with itself. Other banks being looked at for mergers with bigger banks include some smaller and weak banks like Dena Bank and United Bank of India.

SBI has five associate banks—State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad—after it merged State Bank of Saurashtra and State Bank of Indore with itself in the last few years.

Sandhu further added that the department of financial services will go to the cabinet to get approval for government stake dilution in state-run banks.

“We will go to the Cabinet….It will be a combination of FPO (follow on public offer) and in some cases it will be QIP (qualified institutional placement) and some will be retail," he said.

The government has decided to gradually bring down its stake in state-run banks to 51% to ensure that these banks are adequately capitalized without burdening the government’s finances. The government allocated only 11,200 crore for bank capitalization in the current fiscal despite a much higher requirement.

PTI contributed to this story.

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Published: 31 Jul 2014, 05:36 PM IST
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