Government to help SBI raise Rs 8000 crore to meet 8% core capital requirement

MUMBAI: The government is expected to facilitate the country's largest lender, the State Bank of India, to raise Rs 8,000 crore by March'12 to meet 8% core capital requirement, said a top official of the bank.

Speaking on the sidelines of the Bankers' Conference in Chennai, SBI managing director Diwakar Gupta said: "We need Rs 8,000 crore by March'12 to meet the tier-I (or core capital) capital of 8%." He, however, refused to divulge the modalities of government support.

"It could be through a combination of routes (dilution of government share or direct infusion of capital)," he added.

Core capital is one of the key parameters to assess the financial health of a bank. RBI stipulates that banks need to maintain 9% of their risk-weighted assets as capital, including tier-I or core capital, which is essentially equity or equity-like instruments and tier-II capital, which comprises debt instruments. This means banks need to increase the capital base as they lend more to maintain the regulatory requirement.

Earlier on Saturday, the SBI chairman told the media on the sidelines of the same conference that the government had committed capital of up to Rs 4,000 crore to the bank.

"They have set aside Rs 4,000 crore for us. Options will be discussed by government whether it will be a preferential allotment or rights issue. Rights issue cannot be ruled out," SBI chairman Pratip Chaudhuri said on the sidelines of BANCON conference in Chennai on Saturday.

The capital concerns of the country's largest bank assumes significance because global ratings firm Moody's recently lowered the credit rating for SBI on concerns over its asset quality and a weak capital base amid rising interest rates.

Source: EconomicTimes