Nod to special securities for SBI rights issue

These bonds will not be eligible for being counted toward the statutory investment in government securities that banks have to make, but will be considered as the special marketable government securities. A decision to this effect was taken at a meeting of the Union Cabinet here on Thursday.

SBI, 59.73% government-owned, is raising about Rs 16,000 crore by offering one share for every five held at Rs 1,590 rupees apiece.

SBI, the largest Indian bank in terms of number of branches, is raising funds for expansion in the world’s fastest-growing major economy after China. Its close rivals such as ICICI Bank Ltd and HDFC Bank Ltd, which don’t need government approvals, raised billions of dollars in share sales last year to meet loan demands.

“The government is likely to receive around Rs 1,449 crore additionally by way of dividend and taxes from the bank during the year 2008-09 as against an expenditure of around Rs 825 crore as interest to be paid to the bank for the proposed securities,” an official statement said.

In subsequent years the government, however, is likely to receive higher amount of additional revenue (Rs 1,683 crore in the year 2009-10 and Rs 12,049 crore in 2010-11 and thereafter).

The Cabinet also approved the agreement for avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and on capital between the Government of India and the Government of the Grand Duchy of Luxembourg. India, so far, has signed and notified such bilateral treaties for avoidance of double taxation with 71 countries.

Considering the pending cases at the Apex court, the Cabinet gave its nod for introduction of a Bill in Parliament to amend the Supreme Court (Number of Judges) Act, 1956 for increasing the number of judges in the Supreme Court 30 from 25.