SBI rights issue on track: Pratip Chaudhuri

SBI rights issue on track: Pratip Chaudhuri

New Delhi: State Bank of India (SBI) on Friday said its 20,000 crore rights issue proposal is on track and the bank is not looking at any other options to raise capital.

“Government of India, department of financial services is very much looking into it (rights issue proposal). As of now, there is no interim response (from the government) but it is receiving attention," SBI chairman Pratip Chaudhuri told PTI.

“There is no question of looking at any other option but rights issue is very much on the track," he said, adding, “The amount will be finalised after we hear from the government".

The country’s largest bank submitted proposal for capital infusion a few weeks ago.

“We have made our proposal to the government giving different scenarios and different levels of capital adequacy which requires different levels of capital," he said.

As per the proposal, SBI requires 20,000 crore to fund its growth plans over the next two fiscals.

It is also function of percentage of government’s holding in the bank, he said.

Currently, the government has a 59.4% stake in the bank. In case a rights issue is approved and the government wants to retain its holding at the current level, it would need to subscribe to 59.4% of the total rights being issued.

It is to be noted that the government has already announced that it is committed to providing adequate capital to all PSU banks so as to maintain their tier-I capital at 8% and the government’s stake over 58%.

As of June, 2011, the Capital Adequacy Ratio (CAR) of SBI stood at 11.6%. Of this, tier-I capital stood at 7.6% at the end of first quarter, against the minimum 8% level desired by the government.

SBI had raised over 16,000 crore through a rights issue in 2008. In the last SBI rights issue, the government contribution was in the form of bonds to the bank instead of cash.

On the merger of its remaining associate banks, Chaudhuri said, the bank will look into the issue next year. “At present none because we are in the process of digesting and absorbing State Bank of Indore," he said. “We will start looking at the new one in mid 2012," he added.

SBI undertook first ever amalgamation of its associate State Bank of Saurashtra in 2008, followed by State Bank of Indore in August last year.

There are five associate banks of SBI. Two of them are fully-owned -- State Bank of Patiala and State Bank of Hyderabad -- while remaining three, State Bank of Mysore, State Bank of Travancore and State Bank of Bikaner and Jaipur (SBBJ) are not 100% owned.

These three entities are also listed at stock exchanges.