On the cards are moves to cut down its equity stake to below 51 per cent in all its subsidiaries, merge the broking businesses of SBI Securities with SBI Capital Markets, turn SBI Securities into a khoka (shell) company, take the assets of SBI Home Finance on SBI's own books, and position SBI Commercial & International Bank (formerly BCCI) as a techno-savvy new private sector bank.

SBI chairman GG Vaidya told The Financial Express, 48 hours after announcing the bank's results in Calcutta, that "the objective now is consolidation and focussing on shareholder value. All our energies will be directed towards achieving this goal." The bank's results for 1998-99 showed a 45 per cent dip in net profits to Rs 1,028 crore, but most of it was due to one-time costs.

SBI may also tap thedomestic debt market with a subordinated debt issue to shore up its capital adequacy ratio. The bank's capital adequacy ratio has fallen from 14.58 per cent in March 1998 to 12.51 per cent in March 1999, out of which tier-I capital accounts for 9.36 per cent. "We will not let the capital adequacy ratio dip below 12 per cent. If the need arises, we will tap the debt market. It makes sense as the interest rate is quite low," Vaidya said. The bank had floated its first subordinated debt issue in 1995.

The SBI chairman also hinted that the bank will go for a global depository receipts (GDR) issue in the next fiscal. At present, the Reserve Bank of India holds a 59.7 per cent stake in SBI. Since the RBI stake cannot come down below 55 per cent, the GDR float is likely to be a small one.

According to sources close to the bank, the plan is to bring down the parent's stake in four subsidiaries--SBI Caps, SBI Factors & Commercial Services, SBI Funds Management and SBI Gilts--to below 51 per cent by next year. "Thebank is ready to offer stakes to foreign partners in these outfits and follow it up with domestic equity issues," sources said. Vaidya, however, refused to comment on this.

SBI Caps is the country's leading merchant banker, SBI Gilts is a prominent primary dealer in government securities and SBI Funds Management manages 16 mutual fund schemes with an aggregate corpus of about Rs 1,500 crore. The bank has also decided to merge the broking business of SBI Securities with its investment arm SBI Caps. The stockbroking arm was set up two years back when Sebi regulations required SBI Caps to separate its merchant banking and fund-based activities. With SBI Caps opting out of fund-based activities, the dichotomy is irrelevant. "SBI Caps will, therefore, takeover the broking activities and SBI Securities will remain a khoka company," Vaidya said. The Asian Developement Bank holds a stake in SBI Caps as well as SBI Securities and SBI Gilts.

SBI Home Finance, a loss-making listed company in which SBI holds 26 percent stake, may be liquidated with SBI taking care of all its assets and liabilities. According to bank sources, SBI is in favour of recapitalising the company which has got its net worth eroded by posting losses in successive years.

However, if other shareholders like HDFC, UTI, GIC and its subsidiaries and some corporates are not forthcoming in pumping in recap funds, SBI will be left with no choice by to opt for liquidation of the company, sources said.

Vaidya, however, refused to comment on the fate of SBI Home Finance saying "it is too premature to say anything". Public holding in SBI Home Finance is pegged at 31.5 per cent.

The controversial issue of merging the SBI's associate banks with the parent or setting up a separate entity by merging the seven associates has for long remained undecided and the bank is awaiting the finance ministry clearance for amending the State Bank of India Associate Bank Act. The parent, however, has given them freedom to take credit and investment decisionsindependently.