Cabinet gives nod to merger of SBI, arm

Written by fe Bureau | New Delhi | Updated: Jul 22 2011, 07:15am hrs
The government on Thursday approved acquisition of State Bank of India Commercial and International Bank by its parent State Bank of India to eliminate costs in operating the former as a separate entity.

State Bank of India Commercial and International Bank (SBICI) is a wholly-owned subsidiary of State Bank of India (SBI) and has two branches in Mumbai. In the overall analysis, continuation of SBICI in its present form would not create a sustainable organisation with a separate niche, able to hold on its own in the medium term, information and broadcasting minister Ambika Soni told reporters after a Cabinet meeting here.

SBICI is operating since 1994 and has not paid any dividend since inception. Its networth stood at only R128.74 crore at the end of March 2010 on a capital base of R100 crore. On March 31, 2010, the bank had a total business of less than R700 crore, with a return on assets of a meager 0.49%.

RBIs norms for ownership in private sector banks require the bank's capital to be raised to R300 crore. The existing business model of the bank and the returns generated by it over the years do not justify additional capital infusion, Soni said. As an independent bank also, SBICI has to maintain an administrative setup to conform to regulatory requirements, she said.

Benami transactions

The government also decided to bring a new legislation for stricter control over benami transactions. Properties purchased in the name of spouse or siblings could be allowed under benami deals with the government on Thursday approving a new legislation to replace a 22-year old act that remained unimplemented due to "infirmities" in it.

The Benami Transactions (Prohibition) Bill, 2011 will replace the existing Benami Transactions (Prohibition) Act, 1988. The new Bill contains provisions on the definition of benami transaction and benami property, prohibited benami transactions, consequences of entering into a prohibited benami transaction and the procedure for implementing the benami law. Under the new law, anyone violating the rule could be jailed for not less than six months, extendible to two years.

Highway projects

The government also approved two highway projects worth over R2,330 crore covering Kerala and Chhattisgarh.

Customs Act to be tweaked to give more teeth to officers

The Cabinet on Thursday decided to give more teeth to the revenue officers for dealing with cases of tax evasion by amending a section of the Customs Act. The proposed amendment would be introduced in Parliament during the coming session and will apply retrospectively. The move would allow the government to recognise customs officers as proper officers for assessment of customs and validate large number of show-cause notices, which had been rendered invalid as a consequence of a Supreme Court order. The apex court had recently ruled that show cause notices could be issued only by the officers who had been assigned the specific functions of assessment and re-assessment of customs duty. This has a huge revenue implications running into thousands of crores.

"The proposed amendment of Section 28 of the Customs Act would safeguard government revenue involved in show cause notices issued by specified customs officers like officers of Commissionerates of Customs (Preventive) and Directorate General of Revenue Intelligence (DRI). The Officers of DRI alone have issued such notices involving Customs duty of over R7,500 crore," an official statement said.