Bhatt pitches for raising SBI equity

State Bank of India (SBI) Chairman Om Prakash Bhatt does not seem unduly worried about accretion of bad debt. For him, the immediate task is to get a go-ahead from the government to raise fresh equity.

Bhatt told Business Standard that with Parliament approving amendments to the law governing SBI, he is going to push the government to decide one way or the other on expanding the capital base to pursue growth.

“I have written to them twice. In fact, I had the second letter faxed to them. I think I will now go with my officials to seek an approval,” said the chairman of the country’s largest bank who is widely credited with rejuvenating the bank.

For nearly two years now Bhatt has been pushing for Rs 20,000-crore rights issue, under which the government will have to shell out close to Rs 12,000 given that it holds over 59 per cent in the bank. The bank’s capital adequacy ratio is a shade below 14 per cent and it needs capital to fund credit growth of 21-22 per cent this year as well as in the coming years.

Earlier, the government had turned down his plea saying the bank should wait for Parliament to approve the amendments so that SBI could raise funds through a public issue. “Let’s see what the government says. We will do accordingly,” he said, adding that a follow-on public issue was always an option.

The bank has proposed a merger of the remaining associate banks with it. Given that the process takes a while, SBI wanted an omnibus clearance for all the banks. Bhatt said the matter was pending with the government. “We want to do it, but the government has the final say.” On August 26, SBI will merge State Bank of Indore with itself. Last year, it had merged State Bank of Saurashtra. Bhatt is, however, unwilling to discuss which bank will be the next.

But he is more candid on build-up of non-performing assets. “An increase in NPA is always a cause for concern. In any case, we are recovering from a global slowdown. Though the impact on India was not much, there has been some stress in India also.”

During the quarter ended June 2010, the bank’s gross NPAs went up by 35 per cent to over Rs 20,000 crore.

He then tries to comfort the markets. “The rate of growth of NPA formation has peaked as there is a fair amount of effort being put in to manage them. In any case, all NPAs are provided for. But you should not be too worried. After all, when you grow old, you are bound to grow. Similarly, when you lend, there are bound to be some NPAs.”