State Bank of India (SBI) has put on the backburner its plan to acquire a stake in Tata Motors Finance, following the Reserve Bank of India's (RBI's) objection.
SBI had approached the regulator for buying nearly 30 per cent stake in the vehicle financing arm of Tata Motors. The proposal was mooted by SBI last year when O P Bhatt was the chairman.
Top SBI sources said RBI questioned the logic behind the move. A senior SBI official said RBI asked what the joint venture would do which SBI could not do on its own.
RBI also asked the bank to first take the proposal to its board. Sensing the regulator's mood, the SBI brass did not send the proposal to the board.
"We discussed the proposal in the executive committee, but didn't send it to the board after RBI's queries," said the official.
The new management of SBI, which took charge in April, did not revive the proposal.
The plan, if successful,
It would have given SBI a firm entry into the truck and bus business, where it has a negligible presence.
Tata Motor Finance, on its part, would have got access to cheaper money. Bhatt had mentioned this synergy as the reason for the bank's move.
The regulator had earlier ob-jected to SBI's decision to guarantee Tata Motors' Rs 4,200-crore (Rs 42 billion) non-convertible debenture issue. RBI eventually gave the go-ahead but said the approval was one-off.
The new SBI management has indicated it does not want to engage in any conflict with the banking regulator, a phenomenon that was common during the earlier regime.
The new management, in order to improve ties with RBI, has taken steps such as withdrawing the teaser rate scheme, which had drawn flak from the banking regulator.
