According to finance ministry officials, the State Bank of India Subsidiaries (Amendment) Act would allow SBIs associate banks to go for a stock split. It would also pave the way for SBI to pare its holding in the associate banks to 51% from a 55% limit now.
SBI chairman AK Purwar said the seven banks can raise up to Rs 500 crore each from the capital market post amendments. While three subsidiary banks are already listed, the remaining four banks will go for a public offer within a year, he said.
At present, SBI holding in the listed subsidiaries is 75% each in State Bank of Bikaner & Jaipur (SBB&J) and State Bank of Travancore (SBT) and 92.33% in State Bank of Mysore (SBM).
Shares of SBM jumped 20% to Rs 5,481.40, SBT rose 5% to Rs 3,654, and SBB&J rose 5% to Rs 3,690.55. While SBM posted net profits of Rs 206.25 crore in 2004-05, SBT and SBB&J posted profits of Rs 247.13 crore and Rs 205.65 crore, respectively.
Shares in SBI, which owns between 75% and 100% of its seven associate banks, jumped 2.8% to Rs 974.70, while its three listed subsidiaries rose between 5% and 20% the most allowed for each respective share in a day.
The amendment would also raise the voting rights cap for the shareholders in the three banks to 10% from 1%. A cap on individuals holding no more than 200 shares in the subsidiaries would also go, the officials said.
Analysts also expect the amendment in the Act to allow shares to be held without physical certificates, as they are now.
The changes in the act would increase liquidity and attract more investors participation, they said.
SBIs unlisted associates are State Bank of Hyderabad, State Bank of Indore, State Bank of Patiala and State Bank of Saurashtra. The seven associate banks together have a network of 4,596 branches which are fully computerised and 1,070 ATMs networked with SBI ATMs.