SBI to get Rs 6,000 cr fresh capital via pref issue before fiscal-end

The government has agreed to infuse up to Rs 6,000 crore fresh capital into State Bank of India through a preferential issue before the fiscal-end, the bank Chairman, Mr Pratip Chaudhuri, said here today.

“We will be having a preferential issue and will be getting capital through it,” Mr Chaudhuri told PTI when asked about the progress on its proposed recapitalisation.

When asked what could be the quantum of infusion, he said: “The size will be Rs 5,000 to Rs 6,000 crore.”

He did not give any specific indication about the timing of the issue, though he said it will happen before March 31.

SBI’s total capital adequacy ratio stood at 11.4 per cent as of September quarter, of which core Tier-I capital stood at 7.7 per cent, below the 8 per cent-level desired by the government.

Rights issue

It had first announced its intention to raise up to Rs 20,000 crore through a rights issue over a year ago, but the government, which holds a 59.4 per cent stake in the lender, has delayed the proposal as it will have to subscribe to almost two-thirds of the money.

For the past three months, the SBI brass has been pegging the capital infusion size at around Rs 6,000 crore. Last month, Chief Financial Officer, Mr Diwakar Gupta, said an infusion may happen “any time”, while Mr Chaudhuri had last week said that he has received a letter from the Finance Ministry on recapitalisation.

The recapitalisation will take the bank’s Tier-I capital ratio to over 9 per cent, he had said.

Fund infusion

A slew of lenders, including Bank of Baroda, Bank of Maharashtra and Union Bank have made similar announcements in the recent past. Bank of Baroda would be getting Rs 775 crore this fiscal, while Bank of Maharashtra is ready for an Rs 860-crore preferential issue.

“As part of increasing its stake to the mandated 58 per cent, the government has agreed to pump in Rs 775 crore into the bank. The fund infusion will happen before the end of the fiscal,” Bank of Baroda Chairman and Managing Director, Mr Mallya, told PTI last month-end, adding that this would be done by way of a preferential issue.

In March last year, the Government pumped Rs 2,675 crore into BoB, increasing its stake to 57.3 per cent from 53 per cent earlier. With the infusion of Rs 775 crore, government ownership in the bank will touch the mandatory 58 per cent level, Mr Mallya added.

Union Bank also said that it would be recapitalised by the government this fiscal. UBI said it would receive a capital infusion of Rs 280 crore from the government.

Last week, a Finance Ministry official said the government would be pumping Rs 17,000 crore into various state-run banks this fiscal. This makes the additional requirement Rs 11,000 crore, which the official said would be met through a supplementary demand.

The FY’12 Budget had earmarked only Rs 6,000 crore for the recapitalisation of state-run banks in the current fiscal. The other banks that are likely to get a fresh capital infusion are IDBI Bank and Syndicate Bank, among others.

In 2010-11, the government had provided capital support worth Rs 20,157 crore to various public sector banks.

A committee headed by Finance Secretary, Mr R.S. Gujral, is working out a strategy for the capitalisation of public sector banks over a period of next 10 years to meet Basel III requirements, under which the 26 state-run lenders would need Rs 3.6 lakh crore in fresh capital.