The State Bank Of India (Amendment) Act,2006.

M 1163 Vahes No 6066

161-2007 5/2/07

REGISTERED NO. DL- (N)04/0007/2006-08

रजिस्ट्री सं० डी०एल०(एन) 04/0007/2006-08

भारत का राजपत्र

The Gazette ofIndia

P. 196

असाधारण

EXTRAORDINARY

18- 1

भाग II - खण्ड 2

PART II- Section 2

प्राधिकार से प्रकाशित

ePB - 196 / PUBLISHED BY AUTHORITY

सं 601

नई दिल्ली, सोमवार, दिसम्बर 18 , 2006/ अग्रहायण 27, 1928

No. 60 ] NEW DELHI , MONDAY, DECEMBER 18 , 2006/ AGRAHAYANA 27, 1928

इस भाग में भिन्न पृष्ठ संख्या दी जाती है जिससे कि यह अलग संकलन के रूप में रखा जा सके ।

Separate paging is given to this Part in order that it may be filed as a separate compilation .

LOK SABНА

The following Bills were introduced in the Lok Sabha on 18th December , 2006 :-

BILL NO . 99 OF 2006

A Bill further to amend the State Bank of India Act, 1955.

BE it enacted by Parliament in the Fifty- seventh Year of the Republic of India as follows:-

1. ( 1 ) This Act may be called the State Bank of India ( Amendment) Act, 2006. Short title and commencement.

(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette , appoint :

Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision .

23 of 1955 .

section 2.

2. In section 2 of the State Bank of India Act , 1955 (hereinafter referred to as the Amendment of principal Act) , clause ( i) shall be omitted.

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3. For section 4 of the principal Act , the following section shall be substituted , namely:-

Substitution of new section for section 4 .

Authorised capital.

"4. Subject to the provisions of this Act , the authorised capital of the State Bank shall be five thousand crores of rupees divided into five hundred crores of fully paid- up shares of ten rupees each:

Provided that the Central Board may reduce the nominal or face value of the shares , and divide the authorised capital into such denomination as it may decide with the approval of the Reserve Bank:

Provided further that the Central Government may in consultation with the Reserve Bank increase or reduce the authorised capital so however that the shares in all cases shall be fully paid - up shares." .

4. In section 5 of the principal Act,-

Amendment of section S.

(a) for sub - section (2 ) , the following sub - section shall be substituted, namely: ---

"( 2) The issued capital of the State Bank shall consist of equity shares or equity and preference shares :

Provided that the issue of preference shares shall be in accordance with the guidelines framed by the Reserve Bank specifying the class of preference shares , the extent of issue of each class of such preference shares ( whether perpetual or irredeemable or redeemable ) and the terms and conditions subject to which , each class of preference shares may be issued:

Provided further that the Central Board may from time to time increase, with the previous approval of the Reserve Bank and the Central Government , whether by public issue or preferential allotment or private placement , in accordance with the procedure as may be prescribed , the issued capital by the issue of equity or preference shares:

Provided also that the Reserve Bank shall , at all times , hold not less than fifty- one per cent . of the issued capital consisting of equity shares of the State Bank." ;

(b) after sub - section ( 3 ) , the following sub- sections shall be inserted, namely:-

"(4) Subject to the provisions contained in sub- section ( 2 ) , the Central Board may increase from time to time, by way of issuing bonus shares to existing equity shareholders , the issued capital in such manner as the Reserve Bank may, with the approval of the Central Government , direct .

(5) The State Bank may, accept the money in respect of shares issued towards increase in the issued capital in instalments , make calls , forfeit unpaid shares and re - issue them , in such manner as may be prescribed . " .

Amendment of section 10 .

5. In section 10 of the principal Act, in sub - section (2 ) , for the words " fifty- five per cent. ofthe issued capital " , the words " fifty - one per cent . of the issued capital consisting of equity shares , " shall be substituted .

6.After section 10 of the principal Act , the following section shall be inserted , namely:----

Insertion of new section 10A.

" 10A. ( 1 ) Every individual registered shareholder may, at any time , nominate, inthe prescribed manner, an individual to whom all his rights in the shares shall vest in the event of his death .

Right of registered shareholders to nominate .

(2) Where the shares are registered in the name of more than one individual jointly, the joint holders may together nominate in the prescribed manner, an individual to whom all their rights in the shares shall vest in the event of the death of all the joint holders.

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(3) Notwithstanding anything contained in any other law for the time being in force or in any disposition , whether testamentary or otherwise , where a nomination in respect of shares is made in the prescribed manner and which purports to confer on the nominee the right to vest the shares , the nominee shall , on the death of the shareholder or, as the case may be , on the death of all the joint holders , become entitled to all the rights of the shareholder or, as the case may be , of all the joint holders , in relation to such shares and all other persons shall be excluded unless the nomination is varied or cancelled in the prescribed manner.

(4) Where the nominee is a minor , it shall be lawful for the individual registered holder of the shares to inake nomination to appoint , in the prescribed manner , any person tobecome entitled to the shares in the event ofhis death during the minority of the nominee ." .

Amendment of section 11 .

7. In section 11 of the principal Act, after the proviso, the following provisos shall be inserted , namely:-

"Provided further that the shareholder holding any preference share capital in the State Bank shall , in respect of such capital , have a right to vote only on resolutions placed before the State Bank which directly affect the rights attached to his preference shares:

Provided also that no preference shareholder shall be entitled to exercise voting rights in respect of preference shares held by him in excess of ten per cent . of total voting rights of all the shareholders holding preference share capital only. " .

Amendment of section 13 .

8. In section 13 of the principal Act, in sub- section (2 ), for the words " in computer floppies or diskettes " , the words " in computer floppies or diskettes or any other electronic form" shall be substituted .

9. In section 16 of the principal Act ,-

Amendment of section 16.

(a) in sub - section ( 1) , for the word " Bombay " , the words " Mumbai , and shall also be known as Corporate Centre " shall be substituted;

(b) in sub - section (2 ), for the words " Bombay, Calcutta and Madras " , the words "Mumbai , Kolkata and Chennai " shall be substituted .

10. In section 19 of the principal Act ,--

Amendment of section 19 .

(a) in clause (a) , the words " and a vice - chairman" shall be omitted;

(b) for clause ( b) , the following clause shall be substituted , namely: -

"(b) such number of managing directors not exceeding four , as may be appointed by the Central Government in consultation with the Reserve Bank;" ;

11. After section 19 of the principal Act , the following sections shall be inserted, namely:--

Insertion ofnew sections 19A and 19B .

" 19A. ( 1 ) The directors elected under clause (c ) of section 19 shall-

Qualifications for elections as directors .

(a) have special knowledge or experience in respect of one or more of the

following areas , namely:--

(i) agriculture and rural economy,

(ii) banking,

(iii) co -operation ,

(iv) economics,

(v) finance,

(vi) law, 4

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(vii) small- scale industry,

( viii) any other area the special knowledge of, and experience in , which in the opinion of the Reserve Bank shall be useful to the State Bank; and

(b) represent the interests of depositors; or

(2) Without prejudice to the provisions of sub - section ( 1 ) , the Reserve Bank may from time to time notify any additional criteria for persons to be elected as director under clause (c) of section 19 .

(3) Where the Reserve Bank is of the opinion that any director of the State Bank elected under clause ( c) of section 19 does not fulfil the requirements of sub - sections (1) and (2 ), it may, after giving to such director and the State Bank a reasonable opportunity of being heard, by order , remove such director.

(4) On the removal of a director under sub - section ( 3 ) , the Central Board shall co-opt any other person fulfilling the requirements of sub - sections ( 1) and (2) , as a director in place of the person so removed , till a director is duly elected by the shareholders of the State Bank in the next annual general meeting; and the person so co -opted shall be deemed to have been duly elected by the shareholders of the State Bank as a director .

Powerof Reserve Bank to appoint additional directors.

19B. ( 1) If the Reserve Bank is of the opinion that in the interest of banking policy or in the public interest or in the interests of the State Bank or its depositors , it is necessary so to do , it may, from time to time and by order in writing appoint, with effect from such date as may be specified in the order, one or more persons as additional directors of the State Bank .

(2) Any person appointed as additional director under sub -section ( 1 ) shall , ---

(a) hold office during the pleasure of the Reserve Bank and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Reserve Bank may, by order , specify;

(b) not incur any obligation or liability by reason only of his being an additional director or for anything done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto ; and

(3) For the purpose of reckoning any proportion of the total number of directors of the State Bank , any additional director appointed under this section shall not be taken into account ." .

12. In section 20 of the principal Act,

Amendment of section 20

(a) in sub - section ( 1 ) , the words " the vice- chairman " shall be omitted ;

(b) in sub - section ( 14) , the word " vice- chairman " , occurring at both the places , shall be omitted .

Amendment of section 21 .

13. In section 21 of the principal Act , in sub - section ( 1 ) , for clause ( a) , the following clause shall be substituted , namely:-

"(a) the chairman , ex officio or the managingdirector nominated by the chairman;" .

14. For section 21B of the principal Act, the following section shall be substituted, namely:-

Substitution of new section for section 21B

Powers ofLocal Board.

"21B . In respect of the area falling within the jurisdiction of the local head office for which the Local Board has been constituted , a Local Board shall , subject to such general or special direction as the Central Board may give from time to time , 5

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exercise such powers and perform such duties and functions as may be entrusted or delegated to it by the Central Board . ".

Amendment of section 21C .

15. In section 21C of the principal Act , for sub - section ( 2 ) , the following sub - section shall be substituted , namely : ---

"(2) The chairman or the managing director nominated by him shall be an ex officio member of every such Local Committee.".

16. In section 22 of the principal Act , in sub - section ( 1 ), -

Amendment of section 22 .

(a) in clause (d) , the word " vice- chairman " shall be omitted;

(b) for clause (h) , the following clause shall be substituted, namely:-

"(h) in the case of an elected director , he is not registered as a holder in his own right ofunencumbered shares in the State Bank, either as sole holder or as first named holderwhen jointly held, ofa nominal value of at least five thousand rupees:" .

Amendment of section 23 .

17. In section 23 of the principal Act, in clause ( b ) , the word " vice - chairman " shall be omitted.

section 24 .

18. In section 24 of the principal Act , in sub- section ( 1 ) , the word " vice- chairman " Amendment of shall be omitted .

Insertion ofnew section 24A .

19. After section 24 of the principal Act , the following section shall be inserted, namely:

Supersession of Board in certain cases .

"24A . ( 1 ) Where the Central Government , on the recommendation of the Reserve Bank is satisfied that in the public interest or for preventing the affairs of the State Bank being conducted in a manner detrimental to the interest of the depositors or the State Bank or for securing the proper management of the State Bank, it is necessary so to do , the Central Government may, for reasons to be recorded in writing , by order , supersede the Central Board for a period not exceeding six months as may be specified inthe order:

Provided that the period of supersession of the Central Board may be extended from time to time, so , however , that total period shall not exceed twelve months .

(2) The Central Government may, in consultation with the Reserve Bank , on supersession of the Central Board under sub- section (1 ) , appoint , an Administrator (not being an officer of the Central Government or a State Government) who has experience in law, finance , banking , economics or accountancy, for such period as it maydetermine.

(3) The Central Government may issue such directions to the Administrator as it may consider necessary and the Administrator shall be bound to follow such directions .

(4) Notwithstanding anything contained in this Act, upon making the order of supersession of the Central Board-

(a) the chairman , managing director and other directors shall , as from the date of supersession , vacate their offices as such ;

(b) all the powers , functions and duties which may, by or under the provisions ofthis Act or any other law for the time being in force , be exercised and discharged by or on behalf of the Central Board, or by a resolution passed in the general meeting of the State Bank , shall , until the Central Board is reconstituted , be exercised and discharged by the Administrator appointed under sub - section (2) :

Provided that the powers exercised by the Administrator shall be valid notwith- standing that such power is also exercisable by a resolution passed in the general meeting of the State Bank .

(5) The Central Government may, in consultation with the Reserve Bank, constitute a committee of three or more persons who have experience in law, finance , banking , economics or accountancy to assist the Administrator in the discharge of his duties .

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(6) The committee shall meet at such times and places and observe such rules of procedure as may be specified by the rules made under this Act .

(7) The salary and allowances of the Administrator and the members of the committee shall be such as may be specified by the rules made under this Act and be payable by the State Bank .

(8) On and before the expiration of two months before the expiry of the period ofsupersession of the Central Board , the Administrator ofthe State Bank shall call the general meeting of the State Bank to elect new directors and re - constitute the said Board.

(9) Notwithstanding anything contained in any other law for the time being in force or in any contract, no person shall be entitled to claim any compensation for the loss or termination of his office on supersession of the Central Board .

(10) The Administrator appointed under sub - section (2 ) shall vacate office immediately after the re - constitution of the Central Board. " .

Amendment of section 25 .

20. In section 25 of the principal Act, in sub - sections (1) and (2) , the word " vice- chairman " shall be omitted .

21. Section 28 of the principal Act shall be omitted .

Omission of section 28 .

22. In section 29 of the principal Act, in sub - section ( 1),-

Amendment of section 29 .

(a) in clause (a) , the word " and" shall be omitted ;

(b) in clause (b) ,

(i) the words " and the vice- chairman " shall be omitted;

(ii) atthe end , the word " and " shall be inserted;

"(c) when authorised by the chairman , shall preside at the meetings of the Central Board in his absence . " .

23. In section 31 of the principal Act,-

Amendment of section 31 .

(a) for sub -sections (1 ) and (2) , the following sub - sections shall be substituted , namely:-

"( 1 ) The Central Board shall meet at such time and place and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed ; and the meeting of the Central Board may be held by participation of the directors of the Central Board through video- conferencing or such other electronic means , as may be prescribed , which are capable of recording and recognising the participation of the directors and the proceedings of such meetings are capable of being recorded and stored:

Provided that the Central Government may in consultation with the Reserve Bank, by notification in the Official Gazette , specify the matters which shall not bediscussed in a meeting of the Central Board held through video- conferencing or such other electronic means .

(2)All questions at the meeting shall be decided by a majority ofthe votes of the directors present in the meeting or through video- conferencing or such other electronic means and in the case of equality of votes the chairman or , in hisabsence , the managing director authorised by the chairman shall have a second or casting vote . " ;

(b) insub - section ( 4) , for the word " vice- chairman ", the words "managing director authorised by the chairman " shall be substituted .

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Amendment of section 31A.

24. In section 31A of the principal Act, in sub-section (5) , for the words " the vice- chairman ifhe is a member of the Local Board " , the words "the managing director authorised by the chairman " shall be substituted.

Insertion ofnew section 38A .

25. After section 38 of the principal Act, the following section shall be inserted, namely:-

Transfer of unpaid or unclaimed dividend.

' 38A. ( 1 ) Where , after the commencement of the State Bank of India (Amendment) Act, 2006 , a dividend has been declared by the State Bank but which has not been paid to a shareholder or claimed by any shareholder entitled to it , within thirty days from the date of declaration, the State Bank shall , within seven days from the date of expiry of the said period of thirty days, transfer the total amount of dividend which remains unpaid , or unclaimed , to a special account to be named , the " unpaid dividend account " maintained by it .

Explanation. In this sub - section , the expression " dividend which remains unpaid " means any dividend the warrant in respect thereof has not been encashed or which has otherwise not been paid or claimed.

(2) Where the whole or any part of any dividend, declared by the State Bank before the commencement of the State Bank of India (Amendment ) Act , 2006 , remains unpaid at such commencement , the State Bank shall , within a period of six months from such commencement, transfer such unpaid amount to the account referred to in sub -section (1 ) .

I of 1956.

(3) Any money transferred to the unpaid dividend account of the State Bank, in pursuance of this section which remains unpaid or unclaimed for a period of seven years from the date of such transfer shall be transferred by the State Bank to the Investor Education and Protection Fund established under sub - section ( 1 ) of section 205C of the CompaniesAct, 1956 for being utilised for the purpose and in the manner specified in that section . ' .

Amendment of section 39.

26. In section 39 of the principal Act , for the word " December " , the word "March " shall be substituted .

27. In section 40 of the principal Act,--

Amendment of section 40 .

(a ) in sub - section ( 1 ) , for the word " December " , the word " March " shall be substituted;

(b) for sub - section ( 2 ) , the following sub -section shall be substituted , namely: --

"(2) The balance sheet and the profit and loss account shall be signed by the chairman, managing directors and at least three other directors ofthe Central Board ." .

28. For section 42 of the principal Act, the following section shall be substituted, namely:--

Substitution of new section for section 42.

Balance sheet , etc. , ofState Bank may be discussed at general mecting .

"42. ( 1 ) An annual general meeting shall be held in each financial year at the Corporate Centre or at such other place in Mumbai other than the Corporate Centre or at such other place in India and at such time, as shall from time to time be specified by the Central Board and a general meeting other than an annual general meeting may be corivened by the State Bank at any other time and at such place in India as shall from time to time be specified by the Central Board:

Provided that such annual general meeting shall be held before the expiry of six weeks from the date on which the balance sheet together with the profit and loss account and auditors' report, under sub - section ( 1 ) of section 40, is forwarded to the Central Government or to the Reserve Bank , whichever date is earlier.

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(2) The shareholders present at an annual general meeting shall be entitled to discuss and adopt the balance sheet and the profit and loss account of the State Bank made up to the previous 31st day of March or the date specified under section 39 , as the case may be , the report of the Central Board on the working and activities of the State Bank for the period covered by the accounts and the auditors' report on the balance sheet and accounts . " .

Amendment of section 43

29. In section 43 of the principal Act, for sub- section ( 2 ) , the following sub - section shall be substituted , namely:-

"(2) The officers , advisers and employees of the State Bank shall individually or jointly or with other officers , advisers and employees in a Local Committee exercise such powers and perform such duties as may by general or special order, be entrusted or delegated to them by the Central Board or its executive committee ." .

Amendment of section 49

30. In section 49 of the principal Act , in sub - section ( 2 ) , after clause ( c ) , the following clause shall be inserted , namely:-

"( a) the time and place of meeting of the committee and the rules of procedure to be observed by it under sub - section ( 6) ; the salary and allowances of the Administrator and the members of the committee under sub - section ( 7) of section 24A . " .

31. In section 50 of the principal Act, in sub - section ( 2) ,-

Amendment of section 50 .

(i) after clause ( a) , the following clauses shall be inserted , namely: ---

"(aa) procedure for increasing issued capital by the issue of equity or preference shares under sub - section (2 ) ; the manner of accepting money for issued capital , forfeiture and re - issue of shares under sub - section (5 ) of section 5;

( ab) the manner of nominating an individual by one individual jointly under sub - sections ( 1 ) and ( 2 ) ; manner of nominating a minor under sub- section ( 4 ); and the manner of varying or eancellation of nomination under sub- section ( 3) of section 10A; " ;

(ii) in clause (b ) , for the words " floppies of diskettes " , the words " floppies or diskettes or any other electronic form " shall be substituted;

(iii) in clause ( i) , after the words " meetings shall be convened " , the words " and the participation through such other electronic means " shall be inserted .

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STATEMENT OF OBJECTS AND REASONS

The State Bank of India Act , 1955 ( hereinafter referred to as the SBI Act) was last amended in 1993 to enable the State Bank of India to access capital market. While State Bank of India can access capital market by issuing equity shares or bonds , or by both equity share and bonds, there is no express provision under the SBI Act to enable the State Bank to issue preference shares and also bonus shares .

2. The Basel Capital Accord , the current international framework on Capital Adequacy, was adopted in the year 1988 by many banks worldwide and by India in the year 1992 . Thereupon the Reserve Bank of India had introduced a set of norms for income recognition, provisioning, and also for capital adequacy in relation to risk weighted assets . These norms were designed to put the financial accounting and prudential standards of Indian banks on a sound footing in line with current international practices .

3.The Basel Committee on Banking Supervision has worked on a new framework for international convergence on capital standards and in June , 2004 released the new capital adequacy framework known as Basel II . With the introduction of the Basel II , all the public sector banks including the State Bank of India and its subsidiary banks could be required to increase their capital base to meet the minimum requirements . Achievement of the capital adequacy norms under Basel II will improve the basic financial health of the banking system and thus improve its international credibility, since banks in many countries are also in the process of adopting these stancards .

4. The State Bank of India (Amendment) Bill , 2006 seeks to provide for enhancement ofthe capital of the State Bank by issue of preference shares , to enable it to raise resources from the market by public issue or preferential allotment or private placement . The Bill also aims to provide for flexibility in the management of the bank. The Bill proposes to amend the, SBI Act , inter alia, to-

(i) increase the authorised capital of State Bank of India to rupees five thousand crores divided into shares of ten rupees each or of such denomination as may be decided by the Central Board , with the approval of the Reserve Bank and also enable the Central Government to increase or reduce the authorised capital in consultation with the Reserve Bank;

(ii) allow the issued capital of the State Bank to be raised by preferential allotment ofshare or private placement or public issue in accordance with the procedure as may be prescribed by regulations with the previous approval of the Reserve Bank and the Central Government, and the preference shares may be issued in accordance with guidelines framedby the Reserve Bank;

(iii) allow the State Bank to issue bonus shares to the existing equity shareholders with the direction of the Reserve Bank and with the approval ofthe Central Government ;

(iv) allow reduction of Reserve Bank's shareholding from fifty - five per cent to fifty- one per cent consisting of the equity shares ofthe issued capital ;

(v) allow the State Bank to accept share monies in instalments , make calls , and forfeiture of unpaid shares and their re- issue;

(vi) provide for nomination facility in respect of shares heid by individual or joint shareholders;

(vii) restrict the voting rights of preference shareholders of the State Bank only to resolutions directly affecting their rights and also restrict the preference shareholder to exercise voting rights in respect of preference shares held by him to a ceiling of ten 10

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per cent of total voting rights of all the shareholders holding preference share capital only;

(viii) allow the Central Government to appoint not more than four Managing Directors in consultation with the Reserve Bank ;

(ix) abolish the post of Vice- chairman ;

(x) enable a sole shareholder or a first named holder of shares ( when held jointly) ofa nominal value of at least Rs . 5000/- to contest the election for the directorship of State Bank;

(xi) specify the qualifications for election of directors of the State Bank and to confer powers upon Reserve Bank to notify eligibility criteria for such directors ;

(xii) allow the Reserve Bank to appoint additional directors as and when considered necessary in the interest of banking policy and depositors ' interest;

(xiii) confer power upon the Central Government to supersede the Central Board in certain cases on the recommendations of the Reserve Bank and to appoint an administrator for the period during which the Central Board stands superseded;

(xiv) allow the State Bank to hold Central Board meetings through video conferencing or such other electronic means as may be prescribed by regulations ;

(xv) allow transfer of unpaid or unclaimed dividend of the State Bank up to thirty days to ' unpaid dividend account , and after seven years to the ' Investor Education and Protection Fund ' established under section 205C of the Companies Act , 1956 ;

(xvi) entitle the shareholders present in an annual general meeting to ' adopt ' the balance sheet .

5. The Bill seeks to achieve the above objects .

NEW DELHI;

P. CHIDAMBARAM .

The 6th December, 2006 .

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Notes on clauses

Clause 2. This clause seeks to omit clause ( i) of section 2 of the State Bank of India Act, 1955 ( hereinafter referred to as the Act ) as the post of vice- chairman is proposed to be abolished .

Clause 3. This clause seeks to substitute section 4 of the Act for enhancing the authorised capital of the State Bank from twenty crores of rupees divided into two crores of fully paid - up shares of rupees ten each , to five thousand crores of rupees divided into five hundred crores of fully paid - up shares of ten rupees each .

Itisalso proposed to provide that the Central Board may reduce the nominal or face value of the shares , and divide the authorised capital into such denomination as it may decide with the approval of the Reserve Bank .

Itisfurther proposed to provide that the Central Government may in consultation with the Reserve Bank increase or reduce the authorised capital so however that the shares in all cases shall be fully paid- up shares.

Clause 4. This clause seeks to amend section 5 of the Act relating to the issued capital of the State Bank .

Under the existing provisions contained in sub-section (2) of section 5 of the Act, the Central Board may from time to time increase the issued capital but no increase in the issued capital shall be made in such a manner that the Reserve Bank holds at any time less than fifty- five per cent . of the issued capital of the State Bank.

It isproposed to substitute sub- section (2 ) of section 5 of the Act so as to incorporate a provision to enable the State Bank to issue , in addition to equity shares , preference shares as per guidelines framed by Reserve Bank specifying the class of preference shares, the extent of issue of each class of preference shares (whether perpetual or irredeemable or redeemable ) and the terms and conditions subject to which each class of preference shares may be issued .

It isfurther proposed to enable the Central Board to increase the issued capital by public issue or preferential allotment or private placement by issue of equity or preference shares with the previous approval of the Reserve Bank and the Central Government .

Itisalso proposed to provide that the Reserve Bank shall , at all times , hold not less than fifty - one per cent. of the issued capital consisting of equity shares of the State Bank .

It isalso proposed to insert a new sub- sections (4) and ( 5) to section 5 of the Act so as to enable State Bank to issue bonus shares to existing equity shareholders as per direction issued by Reserve Bank with the approval of the Central Government; and also to enable the State Bank to accept the money in respect of shares issued towards the increase in the issued capital in instalments , make calls , forfeit unpaid shares and re - issue them in such manner as may be prescribed .

Clause 5. This clause seeks to amend section 10 of the Act relating to the transferability of shares . It is proposed to amend the sub - section (2 ) of section 10 of the Act so as to reduce the Reserve Bank's existing equity shareholding from fifty- five per cent . to fifty-one per cent. of the issued capital consisting of equity shares of the State Bank .

Clause 6.- This clause seeks to insert a new section 10A in the Act to enable an individual registered shareholder and individual joint holders to nominate an individual to whom all his or their rights in the shares shall vest in the event of the death of such individual or joint holders . The nominee on the death of the shareholder or all joint shareholders will become entitled to all the rights of the shareholder or joint holders as the case may be . It also contains provisions relating to nominee who is a minor .

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Clause 7. This clause seeks to amend section 11 of the Act relating to restriction on exercise of voting rights by shareholders . It is proposed to insert provisos so as to provide that a shareholder holding any preference share capital shall have a right to vote only on resolutions placed before the State Bank which directly affect the rights attached to his preference shares and such preference shareholder shall not be entitled to exercise voting rights in respect of preference shares held by him in excess of ten per cent . of the total voting rights of all the shareholders holding preference share capital only.

Clause 8. This clause seeks to amend sub - section (2 ) of section 13 ofthe Act so as to provide for maintenance of Register of shareholders in any other electronic form in addition to computer floppies or diskettes .

Clause 9. This clause seeks to amend section 16 of the Actto reflect the change of name of Bombay to Mumbai , Calcutta to Kolkata and Madras to Chennai and also to name Mumbai as State Bank Corporate Centre.

Clause 10. This clause seeks to amend section 19 of the Act relating to composition ofthe Central Board . It is proposed to amend clause (a ) of section 19 of the Act to indicate abolition of the post of vice- chairman .

Further, as per the existing provisions contained in clause (b) of section 19 of the Act, there can be two managing directors . It is proposed that there shall not be more than four managing directors as may be appointed by the Central Government in consultation with the Reserve Bank .

In the existing provisions of clause (bb) of section 19 of the Act, the Central Board shall consist of the Presidents of the Local Boards appointed under sub - section (5) of section 21 as ex officio member. Therefore, it is proposed to delete clause (bb ) of section 19 .

Clause 11. This clause seeks to insert in the Act a new section 19A relating to qualification for elected director and also insert a new section 19B relating to power of the Reserve Bank to appoint additional directors .

The provisions contained in sub- section ( 1) of the said new section 19A, inter alia , provide that the directors to be elected under clause (c ) of section 19 shall have special knowledge or experience in respect of one or more of the areas , namely, agriculture and rural economy, banking, co - operation , economics , finance , law, small - scale industry, any other area the special knowledge of, and experience in which in the opinion of the Reserve Bank, be useful to the State Bank and such elected directors should represent the interest of the depositors; and represent the interest of the farmers , workers and artisans .

Theprovisions contained in sub - section ( 2) of the said new section 19A also provide thatwithout prejudice to the provisions of sub - section ( 1 ) , Reserve Bank may notify any additional criteria for persons to be elected under clause (c) of section 19 of the Act .

Theprovisions contained in sub - section ( 3 ) of the aforesaid new section 19A provide that where the Reserve Bank is of the opinion that any director of the State Bank elected under clause ( c) of section 19 does not fulfill the requirements of sub - sections ( 1) and (2) of the proposed new section 19A, it may, after giving to such director and the State Bank a reasonable opportunity of being heard , by order, remove such director .

The provisions contained in sub - section ( 4) of the aforesaid new section 19A provide that on the removal of a director under sub - section ( 3) of the proposed new section 19A , the Central Board shall co - opt any other person fulfilling the requirements of the said sub -sections as a director in place of the person so removed till a director is duly elected by the shareholders of the State Bank in the next annual general meeting and the person so co-opted shallbe deemed to have been duly elected by the shareholders of the State Bank as adirector.

The provisions contained in sub - section ( 1) of the said new section 19B provide that if the Reserve Bank is of the opinion that in the interest of banking policy or in the public interest or in the interest of the State Bank or its depositors , it is necessary so to do , it may 13

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SEC. 21

from time to time and by order in writing appoint with effect from such date as may be specified in the order , one or more persons to hold office as additional directors of the State Bank.

The provisions contained in sub- section (2) of the aforesaid new section 19B provide thatany person appointed as additional director in pursuance of this section shall hold office during the pleasure of the Reserve Elank and subject thereto for a period not exceeding three years at a time as the Reserve Bank may specify and shall not incur any obligation or liability byreason only of his being an additional director or for anything done or omitted to be done ingood faith in the execution of the duties of his office or in relation thereto and he shall not be required to hold qualification shares in the State Bank .

The provisions contained in sub- section (3) of the aforesaid new section 19B provide that for the purpose ofreckoning ar y proportion of the total number of directors of the State Bank, any additional director appointed under this section shall not be taken into account.

Clause 12.--Consequent to the proposed abolition of the post of the Vice-Chairman , this clause seeks to delete the expression "Vice- Chairman " from section 20 of the Act.

Clause 13. This clause seeks to amend section 21 of the Act relating to composition ofLocal Boards .

The existing provisions contained in clause (a ) of sub-section ( 1 ) of the said section provide that the Local Boards shall consist of Chairman , ex officio member .

It is proposed to substitute the said clause so as to provide that the Local Board shall consist of the Chairman , ex officio or the Managing Director nominated by the chairman as a member of the Local Boards .

Clause 14.-This clause seeks to substitute the section 21B of the Act to provide the rationalisation of the powers of the Local Boards by empowering Local Boards to perform such duties and functions as may be entrusted or delegated to it by the Central Board.

Clause 15. This clause seeks to amend section 21C of the Act.

It isproposed to substitute sub - section (2 ) of the aforesaid section so as to provide that the Local Committee shall consist of the Chairman , ex officio or the Managing Director , nominated by the chairman as a member of every such Local Committee .

Clause 16 .--This clause seeks to amend clause (d) of sub - section ( 1 ) of section 22 of the Act by deleting the word " vice-chairman " consequent upon the proposed abolition of the post of vice- chairman .

Further, clause (h) of sub section (1 ) of section 22 of the Act is proposed to be substituted so that either a sole shareholder or a first named holder of the shares when held jointly of a nominal value of at least five thousand rupees can contest the election for directorship ofthe State Bank pursuant to clause (c ) of section 19 of theAct .

Clauses 17 and 18. These clauses seek to amend clause (b) of section 23 and sub- section ( 1 ) of section 24 of the Act by deleting the word " vice- chairman " consequent upon the post of vice- chairman being abolished.

Clause 19. This clause seeks to insert a new section 24A in the Act relating to supersession of Central Board in certain cases .

The provisions contained in the said new section 24A, inter alia, provide that where the Central Government , on the recommendation of the Reserve Bank, is satisfied that in the public interest or for preventing the affairs of the State Bank being conducted in a manner detrimental to the interest of the depositors or the State Bank or for securing the proper management of the State Bank, it is necessary so to do , the Central Government may, for reasons to be recorded in writing, by order , supersede the Central Board for a period not exceeding six months as may be specified in the order. However , the period of supersession ofthe Central Board may be extended from time to time so however that the total period shall not exceed twelve months .

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[PART II-

Itfurther provides that the Central Government, in consultation with the Reserve Bank may, on supersession of the Central Board , appoint an Administrator (not being an officer of the Central Government or a State Government) who has experience in law, finance, banking , economics or accountancy for such period as it may determine . The Central Government may issue such directions to the Administrator as it may consider necessary and the Administrator shall be bound to follow such directions . The Administrator appointed shall vacate office immediately after the Central Board has been reconstituted. The Central Government may in consultation with the Reserve Bank, constitute a Committee to assist the Administrator for managing the affairs of the State Bank during the period of supersession.

It also contains provisions in connection with or arising out of supersession of the Central Board .

Clause 20. This clause seeks to amend sub - sections ( 1 ) and (2 ) of section 25by deleting the word " vice chairman " occurring at both the places , consequent upon the post of vice- chairman being abolished .

Clause 21. This clause seeks to delete section 28 of the Act relating to powers and remuneration of vice chairman consequent upon the post of vice- chairman being abolished.

Clause 22. This clause seeks to amend section 29 of the Act so as to provide for powers of the Managing Director to preside in the absence of the Chairman over the Central Board meetings when authorised by the Chairman .

Clause 23. This clause seeks to amend section 31 of the Act relating to meetings of the Central Board . It is proposed to substitute the said sub - section ( 1 ) so as to provide that the meetings ofthe Central Board may be held by participation of the directors of the Central Board through video conferencing or through such other electronic means as may be prescribed , which are capable of recording and recognising the participation of the directors and the proceedings of such meetings are capable of being recorded and stored. Further , the Central Government may in consultation with the Reserve Bank, by a notification in the Official Gazette, specify the matters which shall not be discussed in a meeting of the Central Board held through video conferencing or such other electronic means .

It is further proposed to substitute sub- section (2 ) of the said section 31 , so as to empower the directors present through video conferencing or such other electronic means for the purpose of voting .

Itisfurther proposed to amend sub - section (4 ) to substitute the words " vice-chairman " by the words " managing director authorised by the Chairman " due to abolition of the said post.

Clause 24 -This clause seeks to amend sub - section ( 5) of section 31A of the Act so as to provide for powers of the Managing Director to preside over the Central Board Meetings when authorised by the Chairman .

Clause 25. This clause seeks to insert a new section 38 A in the Act to provide for the State Bank to transfer the dividend which remains unpaid or unclaimed , after seven days from the expiry ofthe period of thirty days from the declaration of such dividend to a special account to be named " unpaid dividend account " and after a period of seven years from the date of such transfer , to the " Investor Education and Protection Fund" established under sub-section ( 1) of section 205C of the Companies Act , 1956 to be utilised for the purpose and in the manner specified in that section.

Clause 26. This clause seeks to change the present annual closing date as March in placeof December by amending section 39 of theAct .

Clause 27.-This clause seeks to amend sub - section ( 1 ) of section 40 of the Act to incorporate the present annual closing date as March in place of December .

It isalso proposed to amend sub - section (2) ofsection 40 of the Act relating to signing of balance sheet and profit and loss account by the vice -chairman , etc. , by deleting the SEC . 2]

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words " vice - chairman " consequent upon the post of vice - chairman being abolished and also to provide that the balance sheet and the profit and loss account shall be signed by the Chairman , managing directors and at least three other directors of the Central Board.

Clause 28. This clause seeks to amend section 42 of the Act relating to Balance sheet, etc. , to be discussed at general meetings .

The existing provisions contained in sub - section ( 1) of the said section provides that a general meeting referred to as annual general meeting shall be held at such time and place where there is local head office of the State Bank, as shall from time to time be specified by the Central Board and a general meeting be convened by the State Bank at any other time .

It isproposed to provide that an annual general meeting shall be held in each financial year at the Corporate Centre or at such other place in Mumbai other than the Corporate Centre or at such other place in India at such time , as shall from time to time be specified by the Central Board and a general meeting other than an annual general meeting may be convened by the State Bank at any other time and at such place in India as shall from time to time be specified by the Central Board .

Further, the existing provisions contained in sub - section (2 ) of the said section provides thatshareholders present at an annual general meeting shall be entitled to discuss the balance sheet and profit and loss account of the bank .

It is proposed to provide that shareholders present at the annual general meeting shall be entitled to discuss and adopt the balance sheet and profit and loss account .

Clause 29. This clause seeks to amend sub - section ( 2 ) of section 43 of the Act .

As per the existing prov sion the officers , advisers and employees of the State Bank shall exercise such powers anc perform such duties as may by general or special order, be entrusted or delegated to them by the Central Board.

It is proposed to amend the aforesaid section so as to provide that the officers , advisers and employees of the State Bank shall individually or jointly or with other officers , advisers and employees in a Local Committee exercise such powers and perform such duties as may by general or special order, be entrusted or delegated to them by the Central Board or its executive committee.

Clause 30. This clause seeks to insert clause ( a) after clause ( c ) to sub - section ( 2 ) of section 49 of the Act , so as to provide for the time and place of meeting of the Committee and the rules of procedure to be observed by it under sub - section (6) of the proposed new section 24A , and the salary and allowances of the Administrator and the members of the Committee under sub - section ( 7) of the section 24A .

Clause 31. This clause seeks to amend section 50 of the Act relating to power of Central Board to make regulations .

It is proposed to insert clause ( aa ) after clause ( a) of sub - section (2 ) of section 50 of the Act, so as to provide that regulations may provide for procedure for increasing issued capital by the issue of equity or preference shares and the manner of accepting money for issued capital , forfeiture and re - issue of shares under sub - sections (2 ) and ( 5) of section 5.

It is further proposed to insert clause ( ab ) after clause ( aa ) mentioned above , so as to provide for regulation for the manner of nominating an individual by one individual or jointly, the manner of nominating minor , the manner of varying or cancellation of nomination under section 10A .

It is also proposed to amend clause ( b ) of sub - section (2 ) of section 50 , so as to provide for keeping the register of shareholders in any other electronic form in addition to floppies ordiskettes .

[PART II-

THE GAZETTE OF INDIA EXTRAORDINARY

MEMORANDUM REGARDING DELEGATED LEGISLATION

Clause 31 of the Bill seeks to amend section 50 of the State Bank of India Act , 1955 which empowers the Central Board to make regulations after having consultation with the Reserve Bank and with the previous sanction of the Central Government . The matters on which regulations may be made , inter alia , relate to (a) procedure for increasing issued capital by the issue of equity or preference shares under sub - section (2 ) of section 5 and the manner of accepting money for issued capital , forfeiture and re- issue of shares under sub- section (5) of section 5 ; (b) the manner of nomination, the variation or cancellation of nomination under section 10A; and ( c ) the maintenance ofregister of shareholders in computer floppies or diskettes or in any other electronic form .

2. The regulations made under section 50 of the said Act shall have to be laid , as soon as they are made , before both Houses of Parliament .

3. The matters in respect of which regulations may be made are matters of procedure or administrative detail and it is not practicable to provide for them in the Bill itself. The delegation of Legislative power is , therefore , of a normal character .

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SEC. 2]

BILL NO . 100 OF 2006

A Billfurther to amend the Central Road Fund Act, 2000 .

Be it enacted by Parliarnent in the Fifty- seventh Year of the Republic of India as follows:-

1. (1) This Act may be called the Central Road Fund (Amendment) Act, 2006 .

Short title and commencement.

(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette , appoint .

54 of 2000

Amendment of section 9 .

2. In the Central Road Fund Act , 2000 ( hereinafter referred to as the principal Act) , in section 9 , sub - section ( 1) , after clause (b), the following clause shall be inserted, namely: ---

"(ba) take such measures as may be necessary to raise funds for the development ofrural roads; " .

Amendment of section 11 .

3. In section 11 , of the principal Act, after sub - section (1) , the following proviso shall be inserted , namely: -- "Provided that the Central Government may use the share of the Fund under sub- clause (a) of clause ( viii) of section 10 for the repayment of any loan taken for the purpose ofdevelopment of rural roads in any State or Union territory.

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[PART II-

STATEMENT OF OBJECTS AND REASONS

The Central Road Fund Act, 2000 provides for levy and collection by way of cess, excise and customs duty on petrol and high - speed diesel oil for development and maintenance of National Highways , rural roads, State roads and improvement of safety at railway crossings. Under section 9, the Central Government has the power to administer the fund and allocate and disburse such sums as are considered necessary to the concerned departments responsible for the development and maintenance of rural roads . Under section 10, the CentralGovernment is responsible for allocation of fifty percent. of the cess on high - speed diesel oil for the development and maintenance of National Highways , rural roads, State roads and construction of roads over or under railways . The allocation under section 10 is utilised for provision of all -weather connectivity to rural habitations through centrally sponsored scheme " Pradhan Mantri Gram Sadak Yojana " . Under this, a target has been set to provide road connectivity to all rural habitations having a population of 1000 and above (500 and above in hilly and tribal areas ) by 2009. This will require an investment of about Rs.48,000 crores . To bridge the funding gap it has been decided to borrow Rs . 16,500 crores over a period of four years .

2. Since the Central Road Fund Act , 2000 does not have any provision for borrowing for rural roads and utilisation of the proceeds of future cess for repayment of loans, the Central Road Fund ( Amendment ) Bill , 2006 seeks to amend the Act to enable the Central Government to take such measures as may be necessary to raise funds for the development ofrural roads, and it may use the share of the fund for the repayment of any loan taken for the purpose of development of rural roads in any State or Union territory.

TheBill seeks to achieve the above objects .

NEW DELHI;

T. R. BAALU .

The 12th December: 2006.

PRESIDENT'S RECOMMENDATION UNDER ARTICLE 117 OF

THE CONSTITUTION OF INDIA

[Copy of letter No. NH- 11011 / 3 /2006- P & M , dated the 14th December, 2006 from Shri T.R. Baalu , Minister of Shipping , Road Transport and Highways to the Secretary- General , Lok Sabha]

The President, having been informed of the subject matter of the proposed Central Road Fund (Amendment ) Bill , 2006, recommends the introduction under article 117 ( 1 ) ofthe Constitution of India in Lok Sabha .

SEC. 2]

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FINANCIAL MEMORANDUM

An amount of Rs . 48,000 crores will be required to provide road connectivity to all rural habitations having a population of 1000 and above (500 and above in hilly and tribal areas ) by 2009 , for which Rs . 16,000 crores will be available from the cess on high - speed diesel and Rs. 9,000 crores will be in the form of loan from World Bank and Asian Development Bank , and for the rest of Rs . 23,000 crores , it has been decided to borrow Rs . 16,500 crores over a period of four years by creating a separate window under the National Bank for Agriculture and Rural Development . The Central Road Fund (Amendment ) Bill , 2006 seeks to amend theAct to provide enabling provisions to the Central Government for such borrowing and repayment of loans taken for the purpose of development of rural roads in any State or Unionterritory.

P. D. T. ACHARY, Secretary- General .

PRINTED BY THE MANAGER , GOVERNMENT OF INDIA PRESS , MINTO ROAD , NEW DELHI AND PUBLISHED BY THE CONTROLLER OF PUBLICATIONS , DELFII . 2006 .

MGIPMRND-4502GI ( S - 5) -02-01-2007 .