NEW DELHI: State Bank of India, the country's largest lender, may look at raising Rs 15,000 crore through issuing bonds during the current financial year to push its growth strategy, even as the government has virtually ruled out subscribing to a rights issue over the next 12 months or so.
While senior bank executives said they were still hopeful of getting the Centre to loosen its purse strings, given the fiscal pressure, the government is finding it tough to set aside nearly Rs 12,000 crore to subscribe SBI's Rs 20,000 crore rights issue. Besides, the public sector player only needs to bolster is equity base to comply with the revised capital adequacy norms once the new guidelines kick in from April 2013.
The government also reckons that with interest rates rising and loan demand slowing down, the bank's capital requirement for pushing growth would be diminished. "It doesn't make sense for us to borrow at 8% to fund the rights issue when the new norms kick in from April 2013," an official said.
Officials also said economic affairs secretary R Gopalan had started the process of looking at innovative funding methods before he moved to North Block. Over the next few months, the government would be able to take a call on whether these can be implemented or not.
Senior bank executives based in Mumbai told TOI that the lender was not starved for cash and only needed to raise resources as an additional booster. "I still have a headroom of Rs 6,000 crore in Tier I capital and through use of other instruments, I will be able to raise close to Rs 15,000 crore that can help me fund Rs 1.5 lakh crore of lending. So, it is not a dire need but it helps to have some additional comfort," said a top-level executive.
In addition, the bank can opt for a follow-on issue through which the government can shed 8% stake and help SBI raise equity that can be leveraged for further capital-raising . At present, the government holds 59.4% stake in SBI but the law bars the government from reducing its shareholding below 51%.
For nearly three years now, SBI has been seeking additional capital from the government to push 25-30 % growth in business. At present, the bank is more than comfortable on the capital adequacy front with a capital adequacy ratio of 11.98% at the end of March 2011 despite dipping into reserves . The management had to use the reserves to fund a pension liability of nearly Rs 8,000 crore. RBI norms prescribe 9% capital adequacy but the government wants all public sector banks to maintain the ratio at 12%.
Source- Times Of India
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