i Develop Stocks Advisory

Government to invest $2.5 bn in SBI rights shares The Cabinet on Thursday approved a government proposal to invest Rs 9996 crore ($2.5 billion) in the rights share offering by State Bank of India, the country's biggest lender, a spokeswoman said. SBI, 59.7 per cent owned by the government, launched the rights share sale on February 18 hoping to raise $4.2 billion. The spokeswoman said the government would issue special marketable securities, instead of an earlier commitment to issue bonds that would qualify for statutory liquidity reserves (SLR) of commercial banks. The cabinet also modified an earlier proposal to invest Rs 100 billion in the rights issue. Banks in India are required to hold at least 25 per cent of their deposits in government securities under the SLR norm. SBI is offering one rights share at Rs 1,590 for every five held. The sale is open for one month. "On receipt of the approval of cabinet, the transaction will be completed within this financial year," the spokeswoman said. The funds will be used to meet rising loan demand in a fast-growing economy. Shares in the bank fell 1.2 per cent on Thursday to Rs 2,179.30 in a Mumbai market that closed 0.7 per cent higher. The government is estimated to receive Rs 1450 crore in dividend and taxes from SBI in the fiscal year ending in March, the spokeswoman said. State-run firms in India that make profits are required to pay 20-30 per cent dividend annually to the government.