Cabinet to discuss State Bank merger in next meeting: FM

The government on Friday indicated that it would push ahead with key reforms in the banking sector.

The government on Friday indicated that it would push ahead with key reforms in the banking sector. That includes merging and infusing additional equity in key state-run banks. Finance Minister P Chidambaram on Friday also met Reserve Bank of India governor YV Reddy as part of the Budget preparation exercise. However, details of their discussions were not immediately known.

Prior to that meeting, Chidambaram announced that the much-awaited Rs 16,736-crore ($4.3-billion) rights issue of State Bank of India (SBI) would open on February 18. This would help the country’s largest bank raise much-needed capital to meet its increasing loan demands. The announcement comes close on the heels of back-to-back IPO withdrawals by Wockhardt Hospitals and Emaar MGF in the backdrop of stock market turbulence.

However, a confident Finance Ministry on Friday said the SBI rights issue is unlikely to encounter any problems due to market volatility. It said the issue would remain open for a month. In a rights issue, shares are issued — usually at an attractive discounted price — exclusively to a company’s existing shareholders.

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Last month, the SBI board gave its approval to the issue of one share at Rs 1,590 for every five shares held. At the close of the BSE on Friday, SBI shares were up 1.7 per cent to Rs 2,191.45. Currently, the government owns around 60 per cent of the bank. It would now subscribe to Rs 10,000 crore in the rights issue through bonds.

After twice deferring the SBI-State Bank of Saurashtra merger, the Finance Ministry on Friday said it would take up the proposal at the next Cabinet meeting. The amalgamation can only take place after an amendment in laws governing the SBI subsidiary. Though opposition from Left parties persists, there were reports that employees of SBI’s associates support the proposed merger.

Secretarial heirarchy

Grade(Rs/month) Basic /fixed pay

Under secretary 25,000

Deputy secretary 30,000

Joint secretary 60,000

Cabinet secretary 80,000

DA: 6% wef Jan 1, ’07& 14% wef Jan 1, ’08