Cabinet approves capital requirement of SBI

New Delhi, Feb 21 : The Union Cabinet today gave its approval to modify the earlier decision of the Cabinet to the extent that the Government may subscribe to the rights issue of equity shares of State Bank of India (SBI) amounting to Rs. 99.96 billion by issue of "Special Marketable Government Securities" instead of "SLR Marketable Government Securities."

The Government is likely to receive around Rs.14.49 billion additionally by way of dividend and taxes from the bank during the years 2008-09, as against an expenditure of around Rs. 8.25 billion as interest to be paid to the bank for the proposed securities.

However, in subsequent years, the Government is likely to receive higher amount of additional revenues (Rs.16.83 billion in the year 2009-10 and Rs. 20.49 billion in the year 2010-11 and thereafter).

The additional growth of the bank due to its increased capital base will also have 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.

On receipt of the approval of the Cabinet, the transaction will be completed within the current financial year and, thereafter a "securities redemption fund" will be created to redeem these securities on due date.

ANI