The private equity (PE) business is soon going to be within the reach of public sector banks as the banking regulator, RBI is on the final stages of the preparation of guidelines that will permit state-owned banks to undertake private equity.

An association connected with the development informed that "the guidelines are almost ready." He further added that "the announcement is expected by the end of the current financial year."

Earlier in February 2008 when State Bank of India had announced its plans to buy a 19.75% stake in a Mumbai based PE firm, Sage Capital Funds Management, RBI had objected the banking leader. The deal is still is pending as the formal announcement of the approval is yet not declared by the RBI. At the same time SBI is also considering investments in Unitech Realty Investors and South Asian Real Estate.

Presently the banks are permitted to have direct and indirect equity exposure of up to 20% each of their net worth in the capital market.

The public sector banks in the country are now looking forward to invest in private equity space because they are approaching to become corporations with presence across segments.

Like SBI another state-run bank, IDBI Bank had also asked RBI's approval last year to enter into the private equity business. The bank is planning to invest an amount of around Rs 1,000 crore to Rs 1,500 crore for its first fund.

Where the Indian public sector banks are very keen into this private equity business, some private players like ICICI Bank and Axis Bank already have private equity arms. Some other like Yes Bank is planning to put two-third of their funds into private equity.