How to help State Bank of India with-out using our tax money?

Back-ground: The government is the largest shareholder of SBI, with 59% equity.  SBI, the country's largest lender, had submitted the proposal a couple of months back to raise Rs 20,000 crore through the rights issue. The bank requires funding to implement its growth plans over the next two fiscals.

What if no-action is taken?

It will affect the market value of SBI shares a little more, but, will not hurt the common-man of India. In-fact, govt., is supposed to “not-to-influence-market-rate-of-shares”.    This is not an option in the long run since, ratio(s) get worsen considering the growth-plans of SBI.  This will affect the market rate SBI-Shares a bit more, but, it will not affect the poor and the needy people of India.  So, it is not important that govt., should invest our tax-money immediately. 

Why not a public issue?

SBI can go for a public issue of new shares (issue price can be in the range of Rs.1,000 to 1,500-each) and get the additional capital which will improve the current ratio(s) and rating(s).  Alternatively, shares can be issued to SBI-employees at the same price and still improve the ratios and ratings.  Govt.-control can be maintained by ensuring to own 50.001% of the total-issued-share-capital.  Currently it is at 59%.

Why Govt. prefers to invest more instead of above option?

There is no accountability.  People pay taxes, but, they have no say in “how to use their tax money”.  Govt might invest in SBI today and de-invest tomorrow wasting the time and efforts.  

What next?

It is time to make govt. listen to the public.  Govt., should consider people’s voice and try to improve the operating efficiencies.

What is good option?    Public issue of shares by maintaining 50.001% ownership by Govt. of India.  If you can think of a better option, please feel free to email me at sreenivasa.potti@gmail.com