New Delhi, Feb 21: The government will subscribe to Rs 9,995.99 crore worth of State Bank of India (SBI) shares through ''Special Marketable Government Securities,'' instead of ''SLR Marketable Government Securities.'' The modification was approved at a Cabinet meeting chaired by Prime Minister Manmohan Singh.
The transaction would be completed within the current financial year and thereafter a ''Securities Redemption Fund'' would be created to redeem these securities on due date. The government is likely to receive around Rs 1,449 crore additionally by way of dividend and taxes from the bank during 2008-09, as against an expenditure of around Rs 825 crore as interest to be paid to the bank for the proposed securities. However, in subsequent years, the government is likely to receive additional revenues (Rs 1,683 crore in 2009-10 and Rs 2,049 crore in 2010-11 and thereafter).
The additional growth of the bank due to its increased capital base would also have a multiplier effect on the overall performance of the bank, which will gain in terms of its position in the industry, ratings -- both in international as well as domestic markets, and in increased valuation of its stock, besides boost to the economy at large.