PremiumState Bank of India was asked to to delete or amend more than 10 clauses in its original memorandum of association for setting up a subsidiary
The Reserve Bank of India (RBI) directed State Bank of India (SBI) to delete or amend more than 10 clauses in its original memorandum of association for setting up a subsidiary to provide operational support services to the country’s largest lender before approving the proposal, according to a document reviewed by Mint.
RBI’s approval letter to SBI chairman Dinesh Khara on 30 June stated that the subsidiary, State Bank Operations Support Services Pvt. Ltd, with an equity investment of up to ₹10 crore, should not engage in any new activity without prior approval, and any changes to its equity or business structure or nature would also require the regulator’s approval.
As part of the approval process, RBI asked SBI to make changes to its memorandum of association, a document defining the purpose and role of a firm.
For instance, one of the original clauses said the new subsidiary plans to provide cash management services, including monitoring and reconciliation of cash movements between branches and automated teller machines. To this, RBI said, reconciliation services are among the core activities of a bank and cannot be undertaken by a subsidiary, directing SBI to complete such tasks within the bank.
“Therefore, the same may be removed," RBI said, referring to the clause.
Second, the bank proposed that its subsidiary, with permission from parent SBI, guarantee payments under promissory notes, bonds, and debentures. To this, RBI directed the bank to delete this clause, saying the subsidiary won’t be allowed to undertake any financial activity. Third, the subsidiary had also sought approval to hold and purchase shares, stocks, debentures or other rights of any firm. RBI also asked the bank to delete this clause for a similar reason.
Besides, RBI informed the bank that its subsidiary could not enter into any partnerships or joint ventures without prior approval of the regulator and asked SBI to modify a clause. RBI also shot down a clause that said the subsidiary could establish any other company as its subsidiary with the permission of SBI.
“State Bank Operations Support Services will provide support services and business correspondent activities to SBI branches and retail asset credit centres in rural and semi-urban areas, as approved by RBI," SBI said in an exchange filing on 3 August.
The subsidiary is headed by Sanjeev Naryani, who had prior stints at SBI and Bandhan Bank.
On 1 August, the board of the newly formed subsidiary appointed Naryani as the chief executive for three years, with a provision to extend it by two years, according to the minutes of the board meeting. In June last year, SBI chairman Khara told Business Line that the new subsidiary would help it put its workforce to better use.
An email sent to an SBI spokesperson remained unanswered.
As of 31 March 2022, SBI had 244,250 employees, comprising 111,549 officers, 99,259 associates and 33,442 subordinate staff and others.