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Saturday, November 24, 2012

Consolidation in the banking system means disaster for the mango men for whom a new political party launched in New Delhi by Civil Society at least for name shake, AAM AADMI.Mandate Manipulation planned as reforms to continue.

Consolidation in the banking system means disaster for the mango men for whom a new political party launched in New Delhi by Civil Society at least for name shake, AAM AADMI.Mandate Manipulation planned as reforms to continue.

Indian Holocaust My Father`s Life and Time, Chapter: Nine Hundred Twenty Eight

Palash Biswas

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Stating some consolidation in the banking system was inevitable, Finance Minister P Chidambaram today said India must have two or three world size banks.What does the finance minister mean? Literally he hints at imminent superseding of the state bank of India which represents the nationwide banking network. He means private banks owned by corporate houses to be allowed, should replace SBI. It means disaster for the mango men for whom a new political party launched in New Delhi by Civil Society at least for name shake, AAM AADMI.Arvind Kejriwal today unveiled his party and called it the Aam Admi party aiming at the constituency claimed so far by the Congress and minutes after his announcements tweeted that congress loses Aam Admi today.Referring to the slogan of the ruling party "Congress ka haath aam admi ke sath" he added that from now onwards congress support will be for Vadra's, Kalmadis and the BJP.Meanwhile, you may not feel respite despite the fact that the standoff between the government and the opposition over whether there should be voting in Parliament over the decision to allow FDI in multi-brand retail worsened on Friday, with the BJP turning down government's request for help with the passage of crucial legislations linked to financial sector reforms.BJP conveyed its decision not to facilitate the passage of bills to finance minister P Chidambaram during a meeting he held with leaders of opposition in the two Houses, Sushma Swaraj and Arun Jaitley.Bills passed or not passed, it would not stop the finance minister to do exactly what he intends to do. The corporate government of India is quite habitual to bypass the parliament killing the consttitution.Meanwhile,FDI crusader,Mamata promises 1 crore new jobs in West Bengal!

However,with the impasse in Parliament continuing, government on Thursday reached out to the main opposition with home minister Sushilkumar Shinde meeting BJP leader Sushma Swaraj after which he hoped the matter could be resolved by Monday. "Yes, I have talked to her a little bit," Shinde told reporters outside Parliament while referring to his meeting with the leader of opposition in the Lok Sabha. Asked by when the current impasse could be resolved, the home minister said, "Let's see. I hope that by Monday the matter will be resolved...I am trying to settle it by tomorrow (also). Let's see."

Just see!Finance minister P. Chidambaram on Saturday reiterated the ministry's pitch that Reserve Bank of India (RBI) should allow more banks to come up rather than wait for the Banking Regulation Act to get amended.

"It is the government's intention to urge RBI to quickly make the finalization of guidelines (for new bank licence) and allow application for new banks," Chidambaram said at the launch of Bank for the Buck, by Mint's deputy managing editor Tamal Bandyopadhyay.

"We can't open 1,000 branches, we can't achieve financial inclusion ... Unless new licences are given," he said.

Chidambaram said the laws have remained the same or have become even stricter now than what it had been in 1993 when new bank licences were given last. "Hence, there is no reason why RBI should delay giving new licences," he said.

RBI governor D. Subbarao recently said that unless legal issues are clear, RBI cannot give licences for new banks.

Chidambaram said the government will continue with its reforms process.

"The flame of reform is still very much alive... I have in my list over a 100 items and I look at that list everyday to see how much progress we are making."

Among other issues, the government's priorities include formation of the proposed National Investment Board (NIB) that would cut through the bureaucracy of getting permission from multiple authorities for any projects.

The finance minister said Prime Minister Manmohan Singh has assured the minister to bring out a paper on NIB in two weeks.

"Chances of financial reforms Bill being passed in this Parliament session is extremely good."

He also urged the private investors to invest more in projects and cautioned cash-rich PSU firms to spend more.

On the other hand,Two time Gujarat chief minister Narendra Modi looks all set for a landslide victory in the assembly election this December as per ABP News AC Nielsen opinion poll  which suggests that the BJP strongman will get a 2/3 rd  majority bagging 124 seats in the 184 seat assembly. 62% of the voters in Gujarat also want to see Modi to play a national role in 2014 Lok Sabha election.

Modi baiters – Keshubhai Patel of the newly formed Gujarat Parivartan Party and rebel BJP member Kannubhai Kalsaria – might not be able to make a significant dent against the Gujarat chief minister and will end up damaging the Congress party, dividing the anti-Modi votes the opinion poll says. Congress seats are likely to fall from 59 in 2007 to 51 this time. However, Congress party will maintain its 38 percent vote share, the poll says.Although  the BJP vote share could see a slight decline from 2007 when it was 49.12%, the opinion poll indicated that even with 47 percent vote share in 2012 assembly poll, a massive 62% of the urban voters want to see the Gujarat chief minister take on a larger national role in 2014 general election. The opinion poll indicated that 53 percent of the total Gujarat voters want Modi in Delhi leading the party for the Lok Sabha polls.Gujrat however, sends only 26 seats to the Lok Sabha.

With big ticket investments not pouring into West Bengal according to her government's plans, Chief Minister Mamata Banerjee on Saturday promised creation of a crore jobs in the state over the course of time.

"My target is to create employment for one crore people through self-help groups, cooperatives, non-governmental organisations and various government projects," Mamata said after inaugurating the West Bengal State Handicrafts Fair in Kolkata.

Mamata said that 17,000 new small industries, providing employment to 1.54 lakh people, have come up in the state after her government came to power in 2011.

"Setting up of 15,000 other schemes to provide work to 1.12 lakh people are under process and they will start functioning soon," she said.

The Mamata Banerjee government promised to rope in big industrial projects in the state. But so far, the plan has not been much success with entrepreneurs expressing concern over policy issues like land acquisition. Leading industry lobbies have also voiced their concern over the law and order situation.

The Chief Minister said that world-class marketing centres for small-scale industries would be set up at Shantiniketan in Birbhum district, and Kolkata's Rajarhat and Rabindra Sarobar areas.

"The land has been identified at Shantiniketan. Lot of tourists from India and abroad visit Shantiniketan. They can buy small-scale industry products from there. It will help the craftsmen," she said.

Mamata announced that her government would set up marketing hubs in all sub-divisions for the small and cottage industries sector. To boost the handloom sector, she said the workers would be given the work of stitching dresses worn by the state government's disaster management group.

An Economic Times exclusive report exposes the mandate manipulation scheme of the corporate government of India which means that despite stiff opposition the reform regime has to continue for further disaster. ET reports:

Monday will see UPA-II playing what it hopes will be its biggest election card - the nationwide cash transfer scheme that aims to put a total of Rs 3.2 lakh crore per year in the bank accounts of 10 crore poor families, starting January next year.

The per family/per year cash transfer amount will be Rs 32,000, almost three times the average annual earning of a below-the-poverty-line (BPL) family. The cash transfer will replace subsidies for kerosene, LPG, small pension payments as well as wages from job guarantee schemes.

This means, according to senior officials in the PMO who spoke on condition of anonymity, the cash transfer scheme will be "fiscally neutral" since existing indirect subsidies will be replaced by direct cash transfers.

PMO officials said the "big difference" in this welfare reform will be a "huge spending impact on the economy" - poor families will have much more cash at their disposal. Massive in administrative scope and political ambition, the rollout is expected to be completed by April 2014, just in time for the scheduled general elections - the formal announcement will be made by Prime Minister Manmohan Singh on Monday.

Singh will chair a meeting of the national committee on direct cash transfers before greenlighting the scheme. The committee's members are the ministers of finance, rural development, HRD, labour, petroleum, fertiliser and women and child welfare, as well as the deputy chairman of the Planning Commission, Montek Singh Ahluwalia, and the chairman of the Unique Identification Authority of India ( UIDAI), Nandan Nilekani.

The showpiece welfare reform has the full backing of Congress President Sonia Gandhi, senior party officials said, requesting they not be named. Congress strategists are looking at cash transfers as the 'NREG of UPA-II', a senior leader said.

However, many senior officials in the government, speaking on condition of anonymity, said the success of this massive welfare reform was critically contingent on Aadhaar, the electronic platform-based system for providing unique identification numbers for all residents, covering at least 80% of the population.

Aadhar is critical because the cash recipients' bank accounts will be opened on the basis of their identification number - a process designed to eliminate diversion of welfare cash to non-BPL residents. The Aadhar number is the means to making basic banking services accessible to the poor as well as ensuring there's no leakage during cash transfer.

Aadhar's coverage has so far been limited to urban areas in the three years since its launch. "As of now, we have enrolled 250 million, i.e. approximately one in every four Indians. The goal is to make it one in every three Indians by 2013, and by 2014, every second Indian will have an Aadhaar number," Nilekani told ET.

Government payouts towards pensions, scholarships and subsidies worth thousands of crores of rupees will be directly transferred to bank accounts of beneficiaries in 51 districts spread over 15 states from January 1, Finance Minister P Chidambaram said today.

Aimed at checking pilferage, the ambitious government scheme based on Aadhaar-enabled mechanism will cover the entire country by end of 2013.

"We have only five weeks to roll out and once roll-out begins, we want roll-out to be completed in 600 odd districts in India...Larger number of districts will be added every quarter," he said while speaking at the annual banking 'Bancon' conference in Pune.

Addressing chairman and managing directors of several leading banks, Mr Chidambaram said that Prime Minister Manmohan Singh has called a meeting on Monday to discuss issues related to direct cash transfer of subsidy.

The government's major subsidy bill, which includes payments towards food, fertiliser and petroleum, was pegged at Rs. 1.8 lakh crore in the current fiscal. The outgo is expected to increase in view of the high prices of crude oil in the international market.

"Beginning January 1, 2013, (in) 51 districts of India, we wish to transfer all payments of Government of India directly to beneficiary through Aadhaar enabled bank accounts", the Minister said.

Aadhaar, a 12-digit number, serves as a proof of identity and address anywhere in the country. The UIDAI has already issued 21 crore Aadhaar cards.

On growth, he said India is facing a difficult situation because the pace of economic expansion has declined to about 5.5 per cent in the first quarter of 2012-13. The growth in the second quarter is likely to be 5.5 per cent, he said.

The economy was growing by over 8 per cent in the two financial years before slowing to nine-year low of 6.5 per cent in 2011-12.  

The Finance Minister said that to overcome the difficult economic situation, there is a need to find innovative ways to increase output of goods and services.

"We have to overcome this difficult situation through innovation, through finding ways of increasing the production of goods and services," he said adding that finding new ways to help the poor depends on high economic growth both for jobs and income.

He called upon the banks to play an active role in reviving the economy.

"I genuinely and sincerely believe that banks represent the heart of the financial system and it is banks that will drive the revival of India's economy and putting India's economy on high growth path," the minister added.

He further said that India needs to have at least two or three world size banks.

The Minister said consolidation in the banking system was inevitable.

"Finding new business models will inevitably lead to some consolidation... We must create at least 2 or 3 world size banks. China has done it. And if India wants to be and as it will be the third largest economy in the world...we must also have one or two world size banks and some consolidation is inevitable," he said.

Country's largest lender State Bank of India (SBI) has acquired board approval for merger of its remaining five associates with itself. It has already amalgamated two of its subsidiaries.

Later talking to reporters, Chidambaram said RBI has the powers to issue new bank licences and expressed the hope it will take the process forward, "appreciating" government's position.

"Finding new business models will inevitably lead to some consolidation. We should not fear consolidation. I know there is pride and identity, but ultimately some consolidation would have to take place in the banking system in this country," he said at the Bancon-2012 meet in Pune.The statement should be taken very seriously, I warn.

Finance Minister P. Chidambaram today made it clear to RBI that it has the powers to issue new bank licences and expressed the hope it will take the process forward "appreciating" Government's position.

"Let me emphasise that the three powers that RBI want are already there with the RBI. It is already there in the regulation; it is there in the powers to grant the banking licences.

"I am sure the RBI acknowledges and appreciates the well-considered position of the Government and will take the process forward," he told reporters here after inaugurating the two-day annual national banking summit (Bancon 2012).

"We must create at least 2 or 3 world size banks. China has done it. And if India wants to be and as it will be the third largest economy in the world...we must also have one or two world size banks and some consolidation is inevitable," he said. Chidambaram further said that while consolidation takes place among top banks, there would also be place for local area banks.

"In fact, I regret that the idea of the local area bank which was started in 1996 stopped after first three licences were given. I think there is place for a local area bank for serving people of the region, local area, drawing strength from those people and serving those people, he added.

Country's largest lender State Bank of India (SBI) has acquired board approval for the merger of the its remaining five associates with itself. It has already amalgamated two of its subsidiaries.

SBI merged one of its associate, State Bank of Saurashtra, with itself in 2008 besides merging itself with State Bank of Indore in 2010.

Banking Regulation Act

The Finance Minister said amendments to the Act are simply to formalise powers that the central bank is seeking and bring them together into the legislation.

Last week, after Chidambaram asked the regulator to start the process of issuing the much-delayed new banking licences, on November 16, RBI Governor D. Subbarao had said it would be not possible without fulfilling the enabling conditions.

Asked whether the RBI has formally responded to the Ministry that new licences could not be issued without the Bill being passed, Chidambaram said: "well, I don't know if a formal reply has been received to the letter that we sent 10 days ago. I don't know what their formal position is."

Asked whether he is confident of getting the Act passed in the ongoing winter session of Parliament, the Minister replied in the affirmative. "I am pretty confident that the Banking Regulation Act will be passed as early as possible," Chidambaram said.

"Even if the RBI picks up the thread and resumes the process that was started about a year ago of finalising the guidelines and issuing the first licence, that is going to take six to eight months and the occasion to invoke these extraordinary powers will not come the next day," he said.

"The occasion to invoke these extraordinary powers will come only when that bank does something wrong. And that is not going to happen one day after the licence is granted.

"Therefore, by the time the occasion arises, the powers will be there in the Banking Regulation Act. So as stated by the then Finance Minister's Budget speech, we must take the process of finalising the guidelines and receiving applications for new bank licences as early as possible," Chidambaram said.

The RBI is seeking powers to supersede the board of an erring bank, to authorise the acquisition of shares beyond five per cent in a bank holding company, and an exit policy in case of irregularities.

Norms for new licences

On November 15, Chidambaram said he had asked RBI to finalise the guidelines for new licences and start accepting applications for the same pending passage of the Banking Regulations Bill.

The last time the RBI allowed new private banks was in 2002 prior to which it allowed new players in 1991-92.

The RBI issued the final guidelines for new banks in August 2011, including those floated by corporates, but is waiting for the necessary legal powers before it proceeds further. The bank licences were initially slated to be issued way bank in 2008-09.

However, the Finance Ministry wants the RBI to speed up the process, under provisions of the Companies Act, without waiting for amendments to the existing banking laws, in its effort to create a positive sentiment among investors and the industry.

The amendments to the Banking Regulations Act will invest the RBI with supervisory powers over private companies that would enter the banking sector.

BJP sources said Chidambaram had requested the opposition's assistance for Banking Laws (Amendment) Bill, Insurance Laws (Amendment) Bill, Pension Fund Regulatory and Development Authority Bill, Prevention of Money Laundering (Amendment) Bill and Securitization (Amendment) Bill.Times of India reports.

The meeting took place a day after Swaraj and Jatiley, along with party veteran L K Advani, disregarded Prime Minister Manmohan Singh's invocation of national interest to stick to their insistence that the debate in Parliament over government's contentious FDI decision should happen only under a rule which allows for voting. "Punish the government, but don't punish the country," the PM is learnt to have told his guests as he worked on them to drop their demand for voting on the FDI decision.

The government is opposed to the demand because it can cause discomfiture to partners and outside supporters like DMK, SP and BSP. The three parties, critical for the government's survival, have opposed the decision to let in global supermarket chains but don't want to yank the rug from under Congress's feet yet.

The political trapeze may get difficult if Parliament debates the FDI measure under a voting clause: a situation in which they will be under compulsion to translate their professed opposition into a vote against the decision.

Government managers have successfully negotiated such situations in the past, and the prospect of success in persuading SP and BSP is rated high even by political opponents. Government managers, exasperated with dealing with SP and BSP, known for their bare knuckle negotiating tactics, would like to avoid ceding any leverage to the UP outfits; even to the DMK.

BJP and Left are reconciled to being outmaneuvered in a parliamentary vote, but have kept up with their demand chiefly with a view to harass the UPA by sharpening the contradictions within its own fold over the FDI decision. Although it is unlikely to persist with its stand at the cost of causing the washout of yet another session of Parliament, party managers are happy at the prospect of getting another opportunity to force a headcount over FDI.

As it happens, government has to carry out Supreme Court's order to change Foreign Exchange Management Act guidelines in order to let global retail giants set up shop. The process will require the government to take Parliament's consent through statutory resolutions; in other words, another chance for the BJP to seek to torment the government by challenging its partners to live up to their stated opposition to FDI in retail.

Chairman of State Bank of IndiaBSE -0.47 % said that the bank's approach towards merger and acquisition will be limited to its associate banks and it has no immediate plans to cut lending rates now. Economic Times reports.

Speaking at the sideline of the sideline of the Bankers' Conference organised by Bank of MaharashtraBSE -1.27 % in Pune, Pratip Chaudhuri said that the bank already merged two of its bank with SBIBSE -0.47 % in the past and will take call on other associate banks later.

SBI had seven associate banks with majority stake. Of this, it had merged two of its associate banks -State Bank of Indore and State Bank of Saurashtra-with itself. His response follows comment made by finance minister,, P Chidambaram today on need to the have large banks adding that consolidation is inevitable.

With regards to base rate, he said that the bank's Alco has decided against lowering rates immediately, since their rate at the9.75% is the lowest in the country.

On credit growth he said that the demand for corporate continues to be poor even in the first two months of the third quarter. "Retail is still driving growth. We are seeing 30% growth in retail loans," he said at the sideline of the conference..

He further said, "Around 25% of the growth in the retail home loan growth is due to migration of customers from other banks and home loan companies with remaining 75% is fresh customers."

On capital infusion he said that bank has asked for Rs 4000 crore and government has said that it would keep SBI well capitalised. He said that the bank would prefer a rights issue since it would give small investors opportunity participate the issue.

On Kingfisher Airlines, he said that the banks has yet not heard about any fresh capital infusion from the promoter yet and the lenders will be meeting next week on this. SBI has an exposure of rs 1400 crore to Kingfisher AirlinesBSE 1.86 % whose flying license has been suspended.

SBI to meet FinMin next week on rights issue: Pratip Chaudhuri

PUNE: State Bank of India BSE -0.47 % will hold discussion with the Finance Ministry next week on the much-delayed rights issues plan of the bank, its Chairman Pratip Chaudhuri said today.

"We will have a consultation with the Finance Ministry officials next week on the rights issue because they have to give their share in the rights issue," Chaudhuri told reporters on the sidelines of the two-day annual banking summit Bancon 2012 here today.

The chairman, however, did not detail the size of the issue. Last year, it was planning to launch an over Rs 20,000 crore issue.

State Bank has been waiting for a go-ahead from the government, which owns 58.7 per cent in the bank, for an over Rs 20,000 crore rights issue since the middle of FY11. The process was started during the term of the past chairman O P Bhatt.

The government has been delaying the rights issue as its own finances have been constrained for too long now as fiscal deficit had hit a 5.8 per cent of GDP last fiscal.

While denying permission to launch a rights issue last year, the government had infused over Rs 7,800 crore into the bank.

Last week, the Finance Ministry had said that it may allow its banks to raise funds through qualified institutional placement.

Banks need capital to maintain their solvency ratio apart from driving business and SBI's core capital has been dipping driven down by rising bad loans and the resultant provisions.

At the end of the September quarter, SBI had capital adequacy ratio of 12.63 per cent with tier-I capital at 8.97 per cent. The RBI mandated requirement is 8 per cent.

"If we include the profits, the tier-I capital will go above 10 per cent by the end of this fiscal and above 11 per cent if the government infuses some funds," Chaudhuri had said on the earnings day.

Despite reporting a robust 30 per cent rise in net profit to Rs 3,658 crore in the September quarter as it set aside lower amount for provisions, though its bad assets soared to 5.15 per cent of its gross advances and 2.44 per cent to net advances.

In absolute terms, the gross non-performing assets rose to Rs 49,202.46 crore, while net NPA rose to Rs 22,614 crore. The net NPA addition stood at Rs 13,200 crore against Rs 11,400 crore a year ago.

But the bank made 37 per cent less provisions for NAPs at Rs 1,837 crore compared to Rs 2,921 crore reported in the same period last fiscal, as the bank has made higher provisions in the previous quarter.

Betting On Divestment

Hind Copper disinvestment success gives govt hope of achieving Rs 30,000 cr selloff target and reining in fiscal deficit

The government's ambitious Rs 30,000-crore disinvestment programme got a boost on 23 November as the 5.6 per cent stake sale in Hindustan Copper was a resounding success. The Rs 810 crore raised by the government kickstarted the disinvestment process, crucial for reining in a ballooning fiscal deficit target. However, state-run Life Insurance Corp of India and State Bank of India were among the bigger buyers of shares, indicating muted interest from private sector investors.

Encouraged by the success of Hindustan Copper disinvestment, finance minister P Chidambaram appeared confident that the government would be able to meet the Budget target of raising Rs 30,000 crore from stake sale in public sector undertaking during the current fiscal.

"I am happy that issue has been fully subscribed. This is the resumption of the disinvestment process and we will go forward with the disinvestment processes as approved by the CCEA between now and March," Chidambaram told reporters in New Delhi.

"...I hope that we can collect the targeted Rs 30,000 crore," he added.

The bids received were for more than 51.6 million shares or 5.6 per cent shareholding, that were put on offer in the first tranche. The shares were offered at Rs 155 apiece, a 41 per cent discount to 22 November's closing price of HCL on the BSE.

The government offered 37.01 million shares, or 4 per cent of the company, but had the option to sell a further 51.71 million. The government is likely to exercise the overallotment option and allocate all shares for which it received bids, two sources with direct knowledge of the matter said.

HCL shares closed at Rs 213.05, down 20 per cent from its last close on BSE.

Actual bids may be even higher as stock exchanges are yet to complete the compilation of data of all the bids that were received since the opening of the process at 0915 hours this morning. It closed at 1430 hrs.

HCL had kept 25 per cent of the issue reserved for mutual funds and insurance companies.

"No single bidder other than mutual funds and insurance companies shall be allocated more than 25 per cent of the size of the sale," the company added.

The share sale took place on a separate window of the stock exchanges -- BSE and NSE.

The government is banking heavily on disinvestment programme to rein in its fiscal deficit. It had revised the target to 5.3 per cent of the GDP. Global rating agencies have threatened to downgrade India's sovereign credit rating to junk if it fails to rein in its deficit, which is ballooning because of higher spending on food, fuel and fertiliser subsidies and poor tax receipts.

Just last month, Finance Minister P. Chidambaram raised the fiscal deficit target to 5.3 per cent of GDP for the current financial year to end-March 2013 from a previous target of 5.1 per cent.

In fact, pushing forward its disinvestment agenda, the government on 22 November approved sale of its 9.5 per cent stake in the country's largest power producer NTPC that could fetch as much as Rs 13,000 crore.

The government has decided to disinvest minority stake in Rashtriya Ispat Nigam Ltd, Hindustan Aeronautics Ltd, Bharat Heavy Electricals Ltd and Steel Authority of India Ltd.

Besides, stake sale in Hindustan Copper Ltd, MMTC Ltd, National Aluminium Company Ltd Oil India Ltd, NTPC Ltd and NMDC Ltd would also take place by December 20.

The government managed to raise Rs 14,000 crore through share sales in the previous fiscal year, less than half its Rs 40,000 crore target.

Earlier this month, the government pushed back a decision to sell a stake in state-run National Aluminium Co, in a deal that could have raised about $270 million. Last month, state steelmaker Rashtriya Ispat Nigam Ltd shelved an IPO due to disagreement with bankers over pricing, sources with direct knowledge of the matter said.

LIC saves Hind Copper offer, but share melts

Life Insurance Corporation (LIC) of India again came to the government's rescue on Friday – this time to help its offer for sale (OFS) in Hindustan Copper sail through.

Response to the issue was poor with the bids coming at a weighted average price of Rs156.56, slightly above the set floor price of Rs155 a share and 41% less than the closing price on Thursday.

LIC, along with public sector banks, apparently put in the majority of the orders in the last hour of bidding.
The government, which intended to sell 4% stake, or 3.70 crore shares of Hind Copper with an option to sell an additional 5.17 shares through the OFS, got bids for 5.16 crore shares in all.

That helped it raise around Rs810 crore.

The poor response in the bidding impacted the stock price in the secondary market as well, with the stock hitting the lower circuit and closing at Rs213.05, down 20%.

Experts, however, believe the sanity shown by the government in fixing the floor price has helped avoid losses for those who have subscribed to the issue.

"Government has achieved what it wanted and the investors who applied also have an opportunity to encash the difference in allocation price and market price on Monday. Though the share price may fall sharply on Monday, the investors still have a chance to sell the shares at a profit," said Arun Kejriwal, director at Kris Securities.

As per the Securities and Exchange Board of India's guidelines on OFS, the settlement will take place on the next trading day (T+1), similar to trade for trade. So, even if the share price tanks by a further 20% to Rs170, which is quite likely, those who have invested at a lower price will make a profit.

LIC had stepped in to bail the government out even in the last OFS – for ONGC. However, it had to buy the shares at a price higher than that prevailing then, causing a loss.

Experts believe that good-quality upcoming issues from government stable are likely to see higher interest if the floor price is set reasonably.

"As long as sanity is used in pricing, further stake sale in issues like Oil India and NTPC should see better response. NTPC is a low-risk and decent stock, while Oil India, too, is an attractive stock with reasonably traded volumes," said Kejriwal.

Govt ups LIC investment cap to 30%; Irda miffed

State-owned Life Insurance Corporation (LIC) of India, the country's biggest life insurer, can now take up to 30% stake in any listed company, up from the 10% it so far could.

The government has given it the final approval — a move expected to help achieve the disinvestment target of `30,000 crore this fiscal.

LIC officials said the approval is just a reconfirmation that the corporation can go by the LIC Act of 1956, which permits it to take a stake of up to 30% in a single company.
"Government has clarified this position to have stake up to 30%. However, we have internal prudent norms and only in few companies we have gone beyond that," said Sushoban Sarkar, managing director, LIC.

Currently, LIC has breached the limit in IL&FS, UTI AMC, Corporation Bank, MTNL and L&T.

The move, however, has not gone down well with the Insurance Regulatory and Development Authority (Irda), which has been insisting that insurance companies stick to the limit of 10% set under the Irda Act, 1999, to avoid systemic risks, said sources.

Paper on National Investment Board in two weeks: Chidambaram
NDTV | Updated On: November 24, 2012 20:31 (IST)

The Prime Minister is likely to come out with a paper on National Investment Board, said Finance Minister P Chidambaram on Saturday. He was speaking at the launch of the book 'Bank for the Buck' on the success story of HDFC Bank in Mumbai.

"We have identified hurdles for investment under 5 heads - land, environment, fuel supply, finance, state approvals," Mr Chidambaram said.

The proposed board will get over hurdles in sectors where government is dominant player or decision maker, he explained. "Hope it will emerge almost as I had envisaged," the Minister added.

Concerned over the delay in implementation of mega infrastructure projects, Mr Chidambaram had, in September, proposed a Prime Minister-headed NIB to quickly clear projects. Several large projects involving investments of Rs. 1.5 lakh crore are being held up because of delay in statutory clearances.

The NIB aims to provide a single-window clearance for large projects that today are bounced from one ministry to another for various approvals, a process that can sometimes take years. A typical infrastructure project requires clearances from 19 federal ministries and on an average 56 permissions on issues ranging from the environment to defence. The whole process takes up to 24 months.

The Finance Minister also remained optimistic about pushing up investment in the country. With enough domestic demand to keep economy growing at 5.5 per cent and indicators of faster pace of growth for the global economy in 2013, this is the best time to speed up investment, Mr Chidambaram reasoned.

"This is the best time to invest in new projects as the private and public sector is sitting on huge piles of cash," he added.

"Our intention is to kick start investment cycle… Flame of reform is still alive," he said.

At a meeting of the Planning Commission in September, Mr Chidambaram had proposed that NIB's authority be extended to proposals/projects in which the investment is above a certain threshold.

Earlier in June, Prime Minister Manmohan Singh had approved the setting up of an investment tracking system to ensure speedy implementation of mega projects envisaging an outlay of more than Rs. 1,000 crore.

While it was expected to win swift passage through the cabinet last month, it has yet to make it on to the weekly agenda amid bickering between the finance and environment ministries over its powers, and an apparent reluctance to proceed without consensus.

Investors and economists say the NIB should be a top priority for the government given the regulatory delays holding up projects worth nearly Rs. 2,00,000 crore in the road, power, coal and mining sectors alone.

"NIB, NIB, NIB," Rajiv Lall, managing director of infrastructure financing firm IDFC Ltd told Reuters on the sidelines of a World Economic Forum meeting last week, when asked what reforms the government needed to carry out next.

Poor infrastructure is often cited by economists as one of the biggest obstacles to more robust economic growth.

With inputs from Press Trust of India, Thomson Reuters

State Bank of India

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State Bank of India
Type Public
Traded as NSESBIN
BSE SENSEX Constituent
Industry Banking, Financial services
Founded 1 July 1955
Headquarters Mumbai, Maharashtra, India
Area served Worldwide
Key people Pratip Chaudhuri
Products Credit cards, Consumer banking, corporate banking, finance and insurance, investment banking, mortgage loans, private banking, wealth management
Revenue Increase US$ 36.950 billion (2012)[1]
Profit Increase US$ 3.202 billion (2012)[1]
Total assets Increase US$ 359.237 billion (2012)[1]
Total equity Increase US$ 20.854 billion (2012)[1]
Owner(s) Government of India
Employees 292,215 (2012)[1]

State Bank of India (SBI) (NSESBIN, BSE500112, LSESBID) is the largest banking and financial services company in India by revenue, assets and market capitalisation. It is a state-owned corporation with its headquarters in Mumbai, Maharashtra. As of March 2012, it had assets of US$360 billion and 14,119 branches, including 173 foreign offices in 37 countries across the globe. Including the branches that belong to its associate banks, SBI has 21,500 branches.

The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into the other two presidency banks—Bank of Calcutta and Bank of Bombay—to form the Imperial Bank of India, which in turn became the State Bank of India. The Government of India nationalised the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the government took over the stake held by the Reserve Bank of India. SBI has been ranked 285th in the Fortune Global 500 rankings of the world's biggest corporations for the year 2012.[1]

SBI provides a range of banking products through its vast network of branches in India and overseas, including products aimed at non-resident Indians (NRIs). The State Bank Group has the largest banking branch network in India. SBI has 14 local head offices situated at Chandigarh (Punjab & Haryana), Delhi, Lucknow (Uttar Pradesh), Patna (Bihar), Kolkata (West Bengal), Guwahati (North East Circle), Bhubaneswar (Orissa), Hyderabad (Andhra Pradesh), Chennai (Tamil Nadu), Trivandrum (Kerala), Bengaluru (Karnataka), Mumbai (Maharashtra), Bhopal (Madhya Pradesh) & Ahmedabad (Gujarat) and 57 Zonal Offices that are located at important cities throughout the country.

SBI is a regional banking behemoth and is one of the largest financial institutions in the world. It has a market share among Indian commercial banks of about 20% in deposits and loans.[2] The State Bank of India is the 29th most reputed company in the world according to Forbes.[3] Also, SBI is the only bank featured in the coveted "top 10 brands of India" list in an annual survey conducted by Brand Finance and The Economic Times in 2010.[4]



Seal of Imperial Bank of India.
Seal of Imperial Bank of India.

The roots of the State Bank of India lie in the first decade of 19th century, when the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal was one of three Presidency banks, the other two being the Bank of Bombay (incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks were incorporated as joint stock companies and were the result of the royal charters. These three banks received the exclusive right to issue paper currency in 1861 with the Paper Currency Act, a right they retained until the formation of the Reserve Bank of India. The Presidency banks amalgamated on 27 January 1921, and the re-organized banking entity took as its name Imperial Bank of India. The Imperial Bank of India remained a joint stock company.

Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of India, which is India's central bank, acquired a controlling interest in the Imperial Bank of India. On 30 April 1955, the Imperial Bank of India became the State Bank of India. The government of India recently acquired the Reserve Bank of India's stake in SBI so as to remove any conflict of interest because the RBI is the country's banking regulatory authority.

In 1959, the government passed the State Bank of India (Subsidiary Banks) Act, which made eight state banks associates of SBI. A process of consolidation began on 13 September 2008, when the State Bank of Saurashtra merged with SBI.

SBI has acquired local banks in rescues. The first was the Bank of Behar (est. 1911), which SBI acquired in 1969, together with its 28 branches. The next year SBI acquired National Bank of Lahore (est. 1942), which had 24 branches. Five years later, in 1975, SBI acquired Krishnaram Baldeo Bank, which had been established in 1916 in Gwalior State, under the patronage of Maharaja Madho Rao Scindia. The bank had been the Dukan Pichadi, a small moneylender, owned by the Maharaja. The new banks first manager was Jall N. Broacha, a Parsi. In 1985, SBI acquired the Bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the State Bank of Travancore, already had an extensive network in Kerala.

International presence

The Israeli branch of the State Bank of India located in Ramat Gan.

As of 31 March 2012, the bank had 173 overseas offices spread over 34 countries. It has branches of the parent in Moscow, Colombo, Dhaka, Frankfurt, Hong Kong, Tehran, Johannesburg, London, Los Angeles, Male in the Maldives, Muscat, Dubai, New York, Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan and Cape Town. It also has an ADB in Boston, USA.

SBI operates several foreign subsidiaries or affiliates. In 1990, it established an offshore bank: State Bank of India (Mauritius).

In 1982, the bank established a subsidiary, State Bank of India (California), which now has ten branches – nine branches in the state of California and one in Washington, D.C. The 10th branch was opened in Fremont, California on 28 March 2011. The other eight branches in California are located in Los Angeles, Artesia, San Jose, Canoga Park, Fresno, San Diego, Tustin and Bakersfield.

The Canadian subsidiary, State Bank of India (Canada) also dates to 1982. It has seven branches, four in the Toronto area and three in British Columbia.

In Nigeria, SBI operates as INMB Bank. This bank began in 1981 as the Indo-Nigerian Merchant Bank and received permission in 2002 to commence retail banking. It now has five branches in Nigeria.

In Nepal, SBI owns 55% of Nepal SBI Bank, which has branches throughout the country. In Moscow, SBI owns 60% of Commercial Bank of India, with Canara Bank owning the rest. In Indonesia, it owns 76% of PT Bank Indo Monex.

The State Bank of India already has a branch in Shanghai and plans to open one in Tianjin.[5]

In Kenya, State Bank of India owns 76% of Giro Commercial Bank, which it acquired for US$8 million in October 2005.[6]..

Associate banks

SBI main branch at Mumbai lit up
Mumbai Main Branch of SBI in Mumbai.

SBI has five associate banks; all use the same logo of a blue circle and all the associates use the "State Bank of" name, followed by the regional headquarters' name:

Earlier SBI had only seven associate banks that constituted the State Bank Group. Originally, the then seven banks that became the associate banks belonged to princely states until the government nationalised them between October 1959 and May 1960. In tune with the first Five Year Plan, emphasising the development of rural India, the government integrated these banks into the State Bank of India system to expand its rural outreach. There has been a proposal to merge all the associate banks into SBI to create a "mega bank" and streamline operations.[7]

The first step towards unification occurred on 13 August 2008 when State Bank of Saurashtra merged with SBI, reducing the number of state banks from seven to six. Then on 19 June 2009 the SBI board approved the merger of its subsidiary, State Bank of Indore, with itself. SBI holds 98.3% in State Bank of Indore. (Individuals who held the shares prior to its takeover by the government hold the balance of 1.77%.)[8]

The acquisition of State Bank of Indore added 470 branches to SBI's existing network of branches. Also, following the acquisition, SBI's total assets will inch very close to the INR10 trillion mark. The total assets of SBI and the State Bank of Indore stood at INR9,981,190 million as of March 2009. The process of merging of State Bank of Indore was completed by April 2010, and the SBI Indore branches started functioning as SBI branches on 26 August 2010.[9]

SBI Mumbai LHO.
State Bank of India Mumbai LHO.

Non-banking subsidiaries

Apart from its five associate banks, SBI also has the following non-banking subsidiaries:

  • SBI Capital Markets Ltd
  • SBI Funds Management Pvt Ltd
  • SBI Factors & Commercial Services Pvt Ltd
  • SBI Cards & Payments Services Pvt. Ltd. (SBICPSL)
  • SBI DFHI Ltd
  • SBI Life Insurance Co. Ltd.
  • SBI General Insurance

In March 2001, SBI (with 74% of the total capital), joined with BNP Paribas (with 26% of the remaining capital), to form a joint venture life insurance company named SBI Life Insurance company Ltd. Now-a days SBI Life Insurance Co. Ltd ranks among the top and most trusted Life Insurance Companys in India and also abroad. In 2004 SBI DFHI Ltd(DISCOUNT AND FINANCE HOUSE OF INDIA) was founded with its headquarter in MUMBAI, MAHARASHTRA.SBI DFHI Ltd is primary dealer that trades in Fixed income securities(treasury bills, state development loans, government securities, non SLR bonds, corporate bonds) and Short Term Money Market instruments(certificates of deposits, commercial paper, inter-corporate deposits, call and money notice deposits).IT is an institution formed by RBI to support the book building process in primary auctions of Government securities and provide necessary depth and liquidity to the Secondary market in Government securities.

Current Board of Directors

After the end of O. P. Bhatt's reign as SBI chairman on 31 March 2011, the post was taken over by Pratip Chaudhuri, who is the former deputy managing director of the international division of SBI. As of 4 August 2011, there are twelve members in the SBI board of directors, including Subir Gokarn, who is also one of the four deputy governors of the Reserve Bank of India. The complete list of the Board members is:

  1. Pratip Chaudhuri (Chairman)
  2. Hemant G. Contractor (Managing Director)
  3. Diwakar Gupta (Managing Director)
  4. A Krishna Kumar (Managing Director)
  5. S. Venkatachalam (Managing Director)
  6. Dileep C Choksi (Director)
  7. D. Sundaram (Director)
  8. Parthasarathy Iyengar (Director)
  9. G. D. Nadaf (Officer Employee Director)
  10. Rashpal Malhotra (Director)
  11. D. K. Mittal (Director)
  12. Subir V. Gokarn (Director)[10]

Other SBI service points

  • SBI has about 27,000+ ATMs (25,000th ATM was inaugurated by the then Chairman of State Bank Shri O.P. Bhatt on 31 March 2011, the day of his retirement); and SBI group(including associate banks) has about 45,000 ATMs. SBI has become the first bank to install an ATM at Drass in the Jammu & Kashmir Kargil region. This was the banks 27,032 nnd ATM on 27 July 2012.
  • SBI has 99000 offices in India.

Symbol and slogan

  • The symbol of the State Bank of India (no, it's not a key hole). The circle depicts perfection and the small man the common man - being the centre of the bank's business.

Recent awards and recognitions

  • Best Online Banking Award, Best Customer Initiative Award & Best Risk Management Award (Runner Up) by IBA Banking Technology Awards 2010
  • The Bank of the year 2009, India (won the second year in a row) by The Banker Magazine
  • Best Bank – Large and Most Socially Responsible Bank by the Business Bank Awards 2009
  • Best Bank 2009 by Business India
  • The Most Trusted Brand 2009 by The Economic Times
  • Most Preferred Bank & Most preferred Home loan provider by CNBC
  • Visionaries of Financial Inclusion By FINO
  • Technology Bank of the Year by IBA Banking Technology Awards
  • SKOCH Award 2010 for Virtual corporation Category for its e-payment solution
  • The Brand Trust Report:[11] 11th most trusted brand in India.

Major competitor

Some of the major competitors for SBI in the banking sector are ICICI Bank, HDFC Bank, Axis Bank, Kotak Bank and Bank of Baroda. However in terms of average market capital, SBI is by far the largest player in the market.[12]

See also


  1. ^ a b c d e f "2010 SBI Form 10-K". CNN. Retrieved 7 October 2011.
  2. ^ "SBI accounts for one-fifth of country's loans". 25 January 2009. Retrieved 20 August 2010.
  3. ^ Kneale, Klaus (6 May 2009). "World's Most Reputable Companies: The Rankings". Forbes. Retrieved 20 August 2010.
  4. ^ "India's top 10 brands". Retrieved 26 Oct 2010.
  5. ^ "State Bank of India to set up branch in China's Tianjin". Forbes. 21 November 2007. Retrieved 16 July 2010.[dead link]
  6. ^ "State Bank of India Acquired 76% Shareholding in Giro Commercial Bank In 2005". 8 October 2005. Retrieved 21 December 2010.
  7. ^ "Indian Banks' Association". 23 April 2005. Retrieved 21 December 2010.
  8. ^ Business Standard (21 June 2010). "Approvals for State Bank of Indore merger by July : SBI".
  9. ^ Economic Times (26 August 2010). "State Bank of Indore branches to become SBI units from Aug 26 : SBI". The Times Of India.
  10. ^ :: STATE BANK OF INDIA :: Safe Banking With SBI ::
  11. ^ – Indiatoday "Brand Mahatma lags behind Sachin, Aamir: Study". 28 January 2011.[dead link]
  12. ^ "Competitors of SBI in India - Equitymaster".

External links

India S&P CNX Nifty companies of India

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