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Govt may infuse $3.3 bn into SBI via rights issue

Govt may infuse $3.3 bn into SBI via rights issue
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First Published: Fri, Jan 28 2011. 03 43 PM IST
Updated: Fri, Jan 28 2011. 03 43 PM IST
New Delhi/Mumbai: The government may infuse Rs15,000 crore ($3.3 billion) into the country’s largest lender State Bank of India (SBI) in the next fiscal year via a rights issue, a finance ministry source said on Friday.
The money will be allocated in the Budget for the 2011-12 fiscal year that begins in April, the source told Reuters.
SBI has asked for capital infusion of Rs25,000 crore for the next two fiscal years from the government, the source added.
“What the (SBI) management has indicated is that they’re looking to raise this capital partly to fund their growth, partly to maintain a healthy capital adequacy and also to an extent they are not ruling out the use of this money for acquisitions,” Vaibhav Agarwal, banking sector analyst at Angel Broking, said.
SBI on Saturday posted a forecast-beating 14% rise in net profit for the quarter-ended December, but voiced concern about rising interest rates, which may dampen the outlook for banks’ earnings growth in the near term.
“The amount that they are looking to raise seems to be on the higher side. I do not see the need for that much of capital, but I think they are really looking at it from a point of view of raising enough capital for the next 3-4 years,” Agarwal added.
Shares in SBI, which fell 2.3% in early trades, pared some losses to close 1.3% lower at Rs2,618.55 in a weak Mumbai market, which was down 1.54%.
The BSE Bank index shed 1.11% at 11,986.71 points. The government is also likely to infuse another Rs8,800 billion into other state-run banks for helping them meet their capital adequacy ratio, the finance ministry source added.
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First Published: Fri, Jan 28 2011. 03 43 PM IST
More Topics: SBI | Rights issue | Banking | Capital | Budget |