SBI stifled by 20 per cent foreign holding
24 Sep 2001
Mumbai: The governments restriction of 20-per cent foreign holding for the countrys biggest public sector bank, the State Bank of India (SBI), is seen as stifling for the the SBI against its current capital structure and share price valuation.
The RBI had recently increased the FII cap for the banking sector to 49 per cent, but the cap for SBI will remain at 20 per cent by law.
As a result of this, FIIs were forced to stay away from the SBI stock for fear of crossing the cap limit. This is affecting the SBI stock price, which is around the Rs 140-mark.
The RBI presently has a stake of about 60 per cent in SBI. According to the Banking Regulation Act, the RBI has to have a minimum stake of 55 per cent in SBI. Thus, this act has to be modified if any increase in the foreign holding cap of SBI is to be made.
The RBI is inclined to reduce its stake in SBI following the governments policy of reducing its stake in public sector banks, a factor also mentioned in RBIs monetary policy statement. It is now for the government to take up the matter, but there were no signs of any action from the governments side on this front. Until any, the SBI share will continue to be out of bounds for the FIIs.
