Nov. 4 (Bloomberg) -- India plans to amend a law this year allowing the government to reduce its holding in State Bank of India and let the nation’s largest lender raise funds, a finance ministry official said.

The government, which is currently required to hold at least 55 percent of the Mumbai-based lender, intends to introduce legislation in both houses of parliament and secure approval when lawmakers reconvene this month, the official said, declining to be named before an announcement. India holds 59.4 percent of State Bank, according to Bloomberg data.

The lender, which accounts for a fifth of India’s banking system by assets, will need 360 billion rupees ($7.6 billion) over the next five years to maintain its capital adequacy ratio at 12 percent and grow credit, Chief Financial Officer S.S. Ranjan said on Nov. 2. State Bank raised 167 billion rupees in its first share sale in more than a decade in March 2008.

Shares of State Bank were unchanged at 2,103 rupees as of 10:39 a.m. local time today in Mumbai. They have gained 63 percent this year, matching the 61 percent advance in India’s benchmark Sensitive Index.

India’s upper and lower houses of parliament will convene on Nov. 19 for the winter session that will continue until Dec. 22. Parliament has been in recess since the budget session ended on Aug. 7.

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

Last Updated: November 4, 2009 00:14 EST