SBI to list life, MF holding firm soon

State Bank of India has firmed up plans to launch a separate holding company for its life insurance and mutual fund management arms within the next 2-3 months.

O P Bhatt, chairman and manging director of SBI, at the sidelines of Ficci Banking Conclave 2007, said merchant bankers have evaluated the valuation of the new company between $4 billion and $5 billion (Rs 16,000-20,000 crore).

The new company would be listed on the exchanges this year, he added.

The purpose behind floating a separate company was to obtain better synergies in the operations of life insurance and mutual fund wings of SBI, evaluate the valuation of the two subsidiaries and keep options open for fund raising by listing the new company.

This apart , the bank has shortlisted two to three partners for its general insurance foray. "The partners of the general life insurance venture would be finalised this year, though it may not be floated this year," he said.

Bhatt further said high government stakes in public sector banks constrained their lending capacity. With government's stake at SBI currently being 59 per cent, a further 4 per cent dilution of the stake was a possibility, said Bhatt.

"Even if a 4 per cent stake dilution is done, an additional Rs 5,000 crore capital could be generated, which would raise the lending limit just by Rs 50,000," he added.

Capital and resource crunch due to government regulations based upon ideological factors were the two basic shortcomings of the Indian banking system, said Bhatt.

"Money is available with the economy, but not with the banking system. We need and enabling mechanism to make the money available to the bank," he said.

Source: Business Standard