| U.K. Sinha, chairman & managing director of UTI AMC, with SBI chairman A.K. Purwar in Mumbai on Saturday. (Fotocorp)
Mumbai, March 25: Encouraged by the cabinet’s decision to amend provisions of the State Bank of India (Subsidiary Banks) Act, 1959, the country’s largest bank will unlock value in its seven associate banks through public offerings. However, a merger of these banks with SBI is not being considered for now.
State Bank holds between 75 per cent and 100 per cent in the seven associate banks, which include State Bank of Hyderabad, State Bank of Patiala, State Bank of Saurashtra, State Bank of Bikaner & Jaipur (SBBJ), State Bank of Indore, State Bank of Mysore (SBM) and State Bank of Travancore (SBT).
Among them, SBBJ, SBT and SBM are listed on the bourses. SBI's holding in both SBT and SBBJ stands at 75 per cent, while it is placed at 92 per cent in SBM.
Earlier this week, the cabinet gave its approval to amend the existing provisions of SBI (Subsidiary Banks) Act, 1959, which will allow SBI to reduce its stake in the seven banking subsidiaries to 51 per cent. The current floor for SBI's stake in its subsidiaries is 55 per cent. The amendment also seeks to remove the ceiling of 200 shares on individual shareholding in SBI subsidiaries.
Confirming that SBI would trim its holdings in these banks once Parliament gives its nod to the proposal, SBI chairman A.K. Purwar said the stake sale will be done through the “public issue” route. According to Purwar, more than unlocking value for the bank, the sale would yield its associate banks precious capital, which is of high significance in the banking industry in the present circumstances when credit is growing at a healthy pace.
“It (the cabinet decision) is a positive move. SBI will unlock value in the associate banks. There is a very substantial value to be unlocked,” he said.
Purwar said if one was to consider the criteria of total business (deposits plus advances) done by these associate banks, they would form the second largest bank in the country.
Moreover, all these banks were networked and their gross non performing assets were below 3 per cent and net non performing assets were less than 1 per cent.