Need govt's capital infusion, though can wait a while: SBI

India’s largest public sector lender, State Bank of India (SBI), is hopeful of receiving the much needed capital infusion from the government by the end of this financial year.

As already reported, the bank’s proposed right issue awaits a government decision on how much it can give before it approves — the majority stake has to be maintained.

“They have not said they are bringing down the stake. What is on the table is the additional rights issue,” said Pratip Chaudhuri, chairman of SBI. He said the infusion should happen by the end of this financial year. The government currently holds 59 per cent stake in the country’s largest bank.

With tier-I capital at 7.6 per cent against at least eight per cent as preferred by the government, the bank said it would have to ‘manage’ the current financial year if it doesn’t get additional capital. “It is crisis situation if we don’t get capital in 2013. We have other plans to sustain it this year. But in 2013, we will definitely need capital,” said Diwakar Gupta, managing director and chief financial officer.

Options include raising funds via sale of tier-I or tier-II bonds. Reserve Bank of India (RBI) norms mandate banks to have a capital adequacy ratio of at least nine per cent, with six per cent tier-I capital.

The bank may even look at issuing retail bonds, if needed. Gupta said there was adequate liquidity and the current rates were not conducive for issuing retail bonds.

On a revision in lending rates, the bank said it would depend on whether RBI opted for further rises in policy rates. “We will transmit if RBI chooses to go ahead with policy rate rises,” said the chairman. The bank’s base rate is now 10 per cent. The current capital base is adequate to achieve 20 per cent credit growth but the bank will stick to the 16-18 per cent target band this year.

“There is no point in being aggressive, because you compromise on quality,” said Gupta. The aim is to achieve deposit growth of 21-22 per cent for the current financial year.

SBI has no plans to introduce any dual rate housing loan scheme. “Despite our explanations, the earlier product was termed a teaser loan by RBI. Our current home loan product is widely accepted and has seen no reduction in demand as yet. The theme was to keep the product simple,” said Chaudhuri.

SBI’s private sector rival recently re-introduced fixed-cum-floating rate home loans.