New Delhi: The government has given the go-ahead to public sector lender SBI to raise Rs10,000 crore from the market by March 2008, though it still has to decide whether the funds would be raised through a public or a rights issue.
“Government has given an in-principal approval to State Bank of India for raising Rs10,000 crore capital. However, the mode has still to be finalized,” Financial Services secretary Vinod Rai told reporters on the sideline of a conference on microfinance here today.
Rai said the capital raising will happen before the end of this financial year.
The government’s stake would be diluted if the bank is allowed to raise capital through a follow on public offer of shares. However, the rights issue would allow the bank to raise Tier-I capital without diluting government shareholding, which currently stands at 59.73%.
Under the current provision, the government may dilute its stake to 55%.
A bill to enable the government to further reduce its stake in SBI to 51% is pending in Parliament. The bill was referred to the standing committee whose report was tabled recently.
Last week, SBI chairman O P Bhatt said the bank is waiting for the government nod and may raise capital from the market during November-January period.
The bank also plans to raise about Rs15,000 crore during the current fiscal through a mix of tier-I and tier-II bonds to meet its capital requirement.
The bank has set up a target to raise over Rs89,000 crore in the next five years.