Govt to decide on SBI capital infusion

The government is likely to take a call on infusing capital into the country’s largest lender, State Bank of India, in a couple of weeks, according to officials.

“We will decide about capital infusion soon, may be in two weeks or so,” officials said. The capital infusion proposal of the bank was being assessed, said officials, adding all options, including rights issue, preferential share issue and warrants, would be considered.

The government has committed that infusion would happen as and when the bank needs, according to them. According to the proposal, SBI requires Rs 20,000 crore to fund its growth plans over the next two financial years.

It was too premature to comment on the exact mechanism for the capital infusion, but it would take place by the end of the financial year, they said. The government is committed to providing adequate capital to all public sector banks to maintain their Tier-I capital at eight per cent and its stake over 58 per cent.

As of June, the capital adequacy ratio of SBI stood at 11.6 per cent. Of this, Tier-I capital stood at 7.6 per cent, against the minimum eight per cent.

Earlier this month, SBI Chairman Pratip Chaudhuri had said, “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.” He had also said there was no question of looking at any other option, but the rights issue was very much on the track.

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

The government has a 59.4 per cent stake in SBI. 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 per cent of the total rights to be issued.

SBI had raised over Rs 16,000 crore through a rights issue in 2008. In the last rights issue, the government’s contribution was in the form of bonds.

Theoretically, the government could bring down its stake in SBI to 51 per cent, as it has already armed itself with an amendment to do so, against the earlier requirement that it will have to maintain at least a 55 per cent stake in the bank.