To facilitate capital mop-up plans of the State Bank of India (SBI), finance minister Pranab Mukherjee has reintroduced the State Bank of India (Amendment) Bill, 2010, in Lok Sabha on Monday. The Bill will reduce the Centre?s shareholding in the bank from the current level of 55 % to 51 % in sync with the minimum threshold for other banks.

Without the Bill, the bank can raise resources only through rights issue. Post the passage of the Bill, SBI plans to raise Rs 10,000 -15,000 crore in 2010-11, out of the Rs 40,000 crore it plans to raise within next three years.

The Bill?s statement of objects and reasons said the legislation was aimed at allowing ?reduction of shareholding of the Central government from 55% to 51% consisting of the equity shares of the issued capital. The amendment Bill seeks to provide for enhancement of the capital of State Bank by issue of preference shares, to enable it to raise resources from the market by public issue or preferential allotment or private placement.?

The Bill will also provide more flexibility to the management of the bank in running it. After the passage of the Bill, SBI?s authorised capital will rise to Rs 5,000 crore and enable the government to increase or reduce the authorised capital in consultation with RBI. The bank also plans retail bonds next fiscal, said a official.

If Parliament passes the Bill, theCentre will be empowered to appoint not more than four managing directors, abolish the post of vice-chairman and enable shareholders with at least Rs 5,000 worth of shares to contest the election for directorship of the bank.

With the amendment, the SBI would comply with the Basel Capital Accord, the current international framework on Capital Adequacy adopted in 1988 and Basel Committee on Banking

The UPA-I had first brought the bill in Lok Sabha in December 2006 and it was referred to a Parliamentary Standing Committee. But the Bill lapsed due to the dissolution of the House.

The present Bill introduced today is broadly on the same lines as the lapsed one, but incorporates certain recommendations of the Standing Committee.