Cabinet to consider SBI rights issue by 22 November

Cabinet to consider SBI rights issue by 22 November

New Delhi: The Union Cabinet is likely to take a call by 22 November on State Bank of India’s proposed plan to raise about 18,000 crore through a rights issue.

“We have prepared a Cabinet note and it will be taken up at the Cabinet meeting either on 15 November or 22 November," official sources told PTI.

Incidentally, the winter session of Parliament is beginning on 15 November and the government will have to get the Parliament sanction to subscribe to the issue, which is likely to cost the government about 10,000 crore.

The bank is likely to raise 17,000-18,000 crore through the rights issue to meet regulatory requirement and business growth, the sources said.

Although the rights issue would not change the shareholding pattern, the unsubscribed portion of the issue by existing retail shareholders could increase the government share in the country’s biggest lender.

The government’s stake in SBI, which is currently at 59.73 per cent, could go up after the rights issue, if some investors did not take up the offer. Retail investors currently have around four per cent shares in SBI.

As SBI’s share price is currently ruling at over 2,000, some investors, especially retail ones, may not subscribe to the rights offer. The government’s holding in SBI may go up to 61-62 per cent, depending on the unsubscribed portion of rights issue, the sources said.

SBI shares closed down 22.15 at 2,162.50 at the end of Muharat trading on Friday against 2,184.65 in the previous day.

SBI Chairman O P Bhatt had earlier told PTI that the bank

needs not only the growth capital but also the funds for implementation of Basel II norms which benchmark the quantum of capital that a bank is required to put aside for covering the financial and operational risks.

“The bank requires close to 5,000 crore just for meeting Basel II norms," he had said.

The Reserve Bank of India has asked all banks having overseas operations to be Basel II compliant by March 2008.

“We also need capital for complying with AS15 (accounting standard 15 norms relating to employees statutory dues). Banks like SBI would require between 4,000 crore to 5,000 crore. These two needs (Basel II and AS15) alone would require 10,000 crore," Bhatt had said.

According to government estimates, SBI needs to raise around 89,600 crore over the next five years.

SBI has witnessed a 36.04 per cent rise in net profit at 161.14 crore during the second quarter this fiscal against 118.44 crore in the corresponding period of 2006-07.

Total income rose by 33.42 per cent to 1,365.82 crore during the quarter ended September 30, 2007 from 1,023.73 crore in the second quarter last fiscal.