RBI to bring discussion paper on SBI holding company structure

13 Aug 2010

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The Reserve Bank of India (RBI) is expected to bring out another discussion paper on the holding company structure for banks in the next few months which, analysts say, is probably one of the key reasons that RBI had been silent on the issue in the discussion paper on licences for new private banks released on Wednesday.

According to industry sources, the key issue on the holding company structure would be regarding the State Bank of India, which is the country's largest bank in terms of assets and branch network.

SBI has five associate banks and subsidiaries, in which SBI directly holds a majority stake.

The discussion paper would focus on the issue whether the bank should hold direct stake in the associate bank and subsidiaries or float a holding company to which SBI's stake in its subsidiaries would be transferred.

While RBI's discussion paper remains silent on the issue of holding company, the paper makes it clear that promoters of any new bank would need to bring down their stake to at least 20 per cent.

Although the central bank had considered various options, the advantages cited by the bank weigh in favour of the proposal for a general threshold for shareholders at 5 per cent of the capital. At the same time, it calls for raising the threshold for promoters and other significant shareholders to about 20 per cent in the long run.

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