Fund Boost For State Bank Of India (10-Mar-2010)
State Bank of India (SBI) is looking to raise as much as Rs 40,000 crore in the next three years.
It may have the government''s nod to explore American depositories along with debt to shore up its capital base.
The government is the single largest shareholder in the firm at about 59% while the new fiscal will bring good tidings for SBI.
Meanwhile, the government plans to assist SBI raise big-ticket money in order to fund an aggressive credit growth of over 20%.
The government is waiting to hear from the SBI management on the exact quantum of funds to be raised.
This is although the mechanism of funds is yet to be decided.
Earlier, the SBI top brass had informally indicated a Rs 40,000 crore requirement over the next three fiscals.
The finance ministry has not ruled out bonds, preference capital or even an ADR or American depository receipt issue and is hopeful of a decision after Q1 of the new fiscal.
Moreover, Finance Minister Pranab Mukherjee tabled the SBI Amendment Bill in Parliament through which the government proposes to pare its shareholding in the bank to 51%.
The clamour for more funds to fuel this growth will only get louder among government banks.
This is with the government setting an internal credit growth target of at least 20% for all public sector banks (PSBs) in the new fiscal.
In the case of SBI, whose requirements are very high, to be made good via the government''s recapitalisation plan of Rs 16,500 crore announced in the budget.
Earlier, State Bank of India chairman, O P Bhatt said that SBI needs to raise capital around Rs 40,000 crore over the next five-years and this would be through a rights issue and this is in addition to Tier II capital and retail earnings which account for Tier I capital.
Bhatt said that depending upon requirements, this number would keep on changing, especially of the bank''s subsidiaries.
Out of the Rs 40,000-crore, the bank was eyeing to raise up to Rs 20,000-crore in the next financial year.
However, SBI had stated that it is eyeing to raise Rs. 20,000 crore through public issue over the next 2 years, where SBI''s total requirement of fund is Rs. 50,000 crore and set a deadline to raise the money during the next 5 years.
Mr. O P Bhatt, Chairman of SBI said that the bank hopes that half of the amount will come from internal accruals, while the remaining amount have to raised through equity. Where, approximately Rs. 15-20,000 crore, would be raised through the equity over the next 2 years
Mr. Bhatt had said that as on 31st December, 2009 the bank is having excess liquidity of Rs. 75,000 crore and which may last for the next 6 months only.
However, the bank expects that in the next 2 quarters, it will shed bulk deposits of Rs 15-20,000 crore.
Mr. Bhatt also had said that SBI was waiting for the government and other regulatory authorities to give their approval before going through the amalgamation with State Bank of Indore, and he is expecting it may happen within this financial year.
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