SBI to raise Rs 8-9k cr through QIP in FY14

Puts associate bank consolidation on backburner

To strengthen its capital base, the country’s largest lender, State Bank of India, plans to raise equity capital of Rs 8,000-9,000 crore through qualified institutional placement (QIP) before the close of this financial year.

Chairman Arundhati Bhattacharya said on Wednesday the proposed capital raising through QIP was over and above the Rs 2,000 crore the government was injecting as capital into the bank. The aim is to raise the equity capital before March.

The government’s stake in the bank is expected to decline to 58 per cent from the present 62 per cent after the QIP. Bhattacharya said the bank might also raise capital through Tier-II bonds.

SBI’s capital adequacy ratio was 11.69 per cent, with Tier-I capital of 8.73 per cent under the Basel-II norms.

Earlier, India Ratings had said public sector banks would depend more on equity injections from the government, as their capital ratios could be impacted by falling internal accruals, together with pressure to grow the loan portfolio.

SBI has also decided to put plans on merging an associate bank with itself on the back burner for this year. The chairman said the main bank would like to first consolidate internally, move to solid ground and then look for merger of an associate bank.

Pratip Chaudhuri, former chairman, had planned to absorb one associate bank before March 2014 but left the decision on which one to his successor. There are five associate banks — State Bank of Bikaner and Jaipur (SBBJ), State Bank of Travancore (SBT), State Bank of Patiala, State Bank of Mysore (SBM) and State Bank of Hyderabad.

SBI had first absorbed State Bank of Saurashtra with itself in 2008 and then State Bank of Indore in 2010.

SBBJ, SBM and SBT are listed entities.