No SBI rights issue in FY12, says FinMin

The finance ministry on Tuesday ruled out a rights issue for the country’s largest lender, State Bank of India (SBI) in this financial year. However, it assured the lender that its capital requirements would be met by March 31, 2012.

The ministry would have to opt for supplementary demand for grants to meet the capital needs of five-six public sector banks, including SBI, in the current financial year. This capital is pegged at Rs 10,000-20,000 crore in this financial year, against Rs 6,000 crore provided in the Budget.

The ministry also asked all public sector banks to come out with details of their capital requirements for the next ten years, and this could be as high as Rs 3.5 lakh crore. However, at a meeting of the committee on capital requirements for financial institutions on Tuesday, the exact recapitalisation amount for these banks was not decided. “No decision has been taken. We have asked for details from banks on how much capital they would need in the next 10 years,” Finance Secretary, R S Gujral, told reporters after the meeting.

Financial Services Secretary, D K Mittal, said there were different assumptions and estimates. “(Could be) Rs 3.5 lakh crore in the next ten years," he said. He added there would be no rights issue for SBI this financial year, adding the bank could always go for preferential issue. He, however, said, “We will fully recapitalise SBI by the end of Marc…Whatever the requirement, it would be met by the end of March 2012...rest assured that banks would get money by the end of this financial year.”

After Moody’s downgraded SBI by a notch, owing to its low capital adequacy ratio and deteriorating asset quality, Chairman Pratip Chaudhuri had exuded confidence that its long-pending rights issue would be completed by the end of March. “It (rating action) is a reminder to the bank and all shareholders that the recapitalisation measures require greater urgency,” Chaudhuri had said.

SBI had initially submitted a proposal to raise Rs 20,000 crore through the rights issue. The bank had reported a Tier-I capital ratio of 7.60 per cent as of June, against the desired eight per cent.

Other banks that require capital during the current financial year include Bank of India, Bank of Baroda, Syndicate Bank and Indian Bank. The government had, in 2010-11, provided capital support of Rs 20,157 crore to public sector banks, including Punjab National Bank, Bank of Baroda, Union Bank of India, Oriental Bank of Commerce and UCO Bank.