House clears bill to dilute government's stake in SBI to 51 per cent

The Lok Sabha today passed a bill that would provide for reducing the government's holding in the State Bank of India (SBI) further to 51 per cent from 55 per cent and allow SBI to raise funds from the capital market.

The SBI (Amendment) Bill 2010 also provides for raising the authorised capital of the bank from Rs1,000 crore to Rs5,000 crore.

The government holds 59.41 per cent equity in SBI as of now and the amendment provides for a reduction of nearly 9 per cent of SBI's equity held by the government.

The bill provides for allowing SBI to raise capital through issue of fresh equity, preference shares and also issue bonus shares to existing shareholders.

The bill, Mukherjee said, "will provide for enhancement of the capital of State Bank by issue of preference shares, to enable it to raise resources from the market by public issue or preferential allotment or private placement."

While the SBI Act, 1955, was amended in 1993 to enable it to access capital market, there was no express provision under the amended Act to enable SBI to issue preference shares or bonus shares, he noted.