Mumbai: The State Bank of India, the country''s largest lender, will raise Rs50,000 crore capital from domestic and overseas markets in the next three years to finance its expansion plans, including the setting up of a holding company for its non-bank subsidiaries.

"In the next three years roughly Rs50,000 crore of capital may be needed by SBI in addition to normal plough-back of profits to meet our challenging business growth and expanding role overseas," State Bank of India chairman O P Bhatt told the annual general meeting.

The proposed subsidiary will manage pension funds under the New Pension Scheme for government employees, he said.

"We are considering setting up a holding company for our non-banking subsidiaries," Bhatt said, adding that to begin with, the bank''s shareholdings in the asset management and insurance companies would form the holding company.

This, he said, is aimed at achieving better financial planning and reducing the demand on SBI for capital infusion in some of its subsidiaries.

The holding company could be listed separately and capital raised for the use of the two companies, he said, adding "this will enable the bank to capture the value that was available in these businesses."

SBI has been shortlisted by the Pension Fund Regulatory and Development Authority (PFRDA) as one of the four players, he said, adding pension funds offered a huge business opportunity as only 11 per cent of the current workforce of 45 million is covered by employment benefits.

The Reserve Bank of India , meanwhile, has agreed to transfer its entire holding in State Bank of India to the central government against cash payment of Rs35, 531.33 crore on June 29, a day before RBI closes its annual books of account on June 30.

Finance minister P Chidambaram, in his budget speech, had said RBI''s stake in SBI would be transferred to the centre in order to separate ownership and regulatory functions of the central bank.

Chidambaram said the government has raised about Rs5,000 crore through bonds outside the scheduled borrowing to partly fund the deal. The government''s additional borrowing in the first half of 2007-08 would be utilised to buy RBI''s holding in SBI, he added.

The government promulgated SBI Amendment Ordinance 2007 on June 21, amending the State Bank of India Act, 1955 for buying RBI''s entire 59.7 per cent shareholding in SBI.

The cabinet approved the transfer of stake on 1 February.

Media reports said the government is planning a two-stage equity share strategy for the bank by way of a rights equity and preference shares issue - a move that could actually raise its stake in the bank in the short-term.

In the second stage, the government will sharply dilute its stake through a share sale in the domestic and international markets.

After RBI sells its stake, the government will hold 59.73-per cent stake in SBI. An amendment to the Act that governs SBI is likely to be cleared by the parliament during the monsoon session, allowing for a reduction in the government''s stake to 51 per cent. The amendment will also clear the way for a sale of preference shares.