MINISTER OF THE STATE IN THE MINISTRY OF FINANCE
(SHRI P. CHIDAMBARAM)
(a) to (d) : A statement is laid on the Table of the House.
STATEMENT FOR LOK SABI1A STARRED QUESTION NO.#244
FOR 8TH DECEMBER 2006 REGARDING ACQUISITION OF SBI SHARES
TABLED BY SHRI SURESH PRABHAKAR PRABHU AND SHRI SHAILENDRA KUMAR
(a) & (b): Yes, Sir. The Committee on Banking Sector Reforms (Narasimham Committee
II), inter-alia, observed that it is inconsistent with the principles of effective
supervision that the regulator is also an owner of a bank and this would require the
Reserve Bank of India (RBI) to divest its holding in banks and financial institutions.
In its Monetary and Credit Policy for the year 2001-02, RBI announced its intention to
transfer the ownership of shares in State Bank of India (SBI), National Housing Bank
(NHB) and National Bank for Agriculture and Rural Development (NABARD) in favour of
the Government of India. Accordingly, RJBI has sent a proposal to transfer its shares
in these entities.
(c) & (d): The Committee on Fuller Capital Account Convertibility (FCAC) headed by
Shri S.S. Tarapore has, in its report submitted to RBI on 31st July, 2006, recommended
that given the imperative need for strengthening the capital of banks in the context
of Basel II and FCAC, this transfer should be put on hold. However, SBI has a
comfortable capital adequacy of 12.63% as on 30.09.2006, which is well above the
minimum regulatory requirement of 9%. Further, the bank has a number of avenues,
irrespective of its ownership, to strengthen its capital viz. by raising fresh equity,
issue of Innovative Perpetual Debt Instruments (IPDI) eligible for inclusion as Tier I
capital, issue of various capital instruments to shore up its Tier II capital, etc.
Hence, transfer of RBI shareholding in SBI to the Government of India would not in any
way adversely impact the capital raising ability of the Bank.