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%.
RBI’s 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.
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.
The government also approved