Pranab Mukherjee Moves SBI Bill In Lok Sabha (08-Mar-2010)
A Bill was introduced in the Lok Sabha on Monday.
The bill was seeking to lessen Centre''s shareholding in State Bank of India (SBI) from 55% to 51%.
It also asked to permit the bank to raise more capital from the market through preference shares.
However, Finance Minister Pranab Mukherjee moved the SBI (Amendment) Bill, 2010, in the midst of slogan shouting by SP, RJD and BSP members.
This was against the Women''s Reservation Bill in its present form.
The Bill''s statement of objects and reasons stated that the legislation was aimed at permitting "reduction of shareholding of the Central Government from 55%-51% consisting of the equity shares of the issued capital.
Meanwhile, it said the SBI Act, 1955, was amended in 1993 in order to enable the bank to access the capital market.
There is no express provision under the SBI Act to enable the bank to issue preference shares and also bonus shares.
While SBI can access the capital market by issuing equity shares or bonds, or by both equity shares and bonds.
The amendment bill looks to provide for boosting of the capital of SBI by issue of preference shares.
This is in order to enable it to raise resources from the market by public issue or preferential allotment or private placement.
Moreover, the Bill aims to provide for flexibility in the management of the bank and will provide for increasing the authorized capital of the SBI to Rs.5,000 crore.
It will enable the Central Government to raise or reduce the authorized capital in consultation with the RBI.
On the other hand, the Bill will permit SBI to raise issued capital by preferential allotment of share or private placement or public issue or rights issue.
This will be in accordance with procedure, apart from bonus shares to existing equity shareholders through Central Government direction.
Therefore, if Parliament passes the Bill, the Central Government will be empowered to appoint not more than four managing directors, abolish the post of Vice-Chairman and enable shareholders with at least Rs.5,000 worth of shares to contest the election for directorship of the bank.
The SBI Act was last amended in 1993 to enable the bank to access the capital markets. While the SBI can issue equity shares or bonds, there is no provision that will allow it to issue preference and bonus shares.
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