Govt to decide on rights issue in a fortnight

The State Bank of India’s (SBI’s) plans for raising fresh capital inched further ahead with the government today saying it would decide on the rights issue within a fortnight. The country’s largest lender is expected to raise capital in the range of Rs 18,000-21,000 crore.

“We are number crunching that (proposal for the rights issue) at this point of time. I think some decision would be taken, perhaps in the next 15 days,” Financial Services Secretary R Gopalan said on the sidelines of an event organised by consultant Skoch here. He said the presumptions under which additional requirement had been asked for were being looked into by the government.

“In any case, the amount is dependent on what we arrive at along with SBI. As to how valid those presumptions are, that exercise is on at this point of time,” Gopalan said.

“Once that is there, the next question will be what form will we be doing it in. That is also being discussed with SBI,” he added. The government holds about 59 per cent stake in SBI. If it clears the proposal, it will have to subscribe to the issue to the extent of its holding, so as to maintain its stake at the existing level.

Depending on the decision taken, Gopalan said there could be implications on the budget. The decision will be taken in the current financial year. However, disbursement can be made either during this or the next financial year, subject to the decision made. However, SBI exuded confidence its rights issue will happen this financial year. Chairman O P Bhatt said the bank expected the approvals to come this month and the issue would to come out this financial year.

The government has accepted SBI needs capital. The bank had asked for a rights issue of Rs 24,000 crore, but as the government will have to contribute around 12,000 crore (in proportion to its stake), the final issue size would be between Rs 18-21,000 crore, Bhatt said.