State Bank of India is hopeful of a positive response from the Government to its rights issue, which it expects to float before the end of the current financial year, said Mr Pratip Chaudhuri, Chairman.

There is uncertainty as to whether the Government will be in a position to stump up the funds required to subscribe to the issue. This is so because during April-May 2011, the Central Government's revenue deficit and fiscal deficit turned out to be higher than the levels during the corresponding period of the previous year, reflecting lower revenue receipts and higher expenditure.

India's largest bank had sought the Government's permission last year to float a Rs 20,000-crore rights issue. To keep its stake intact at 59.4 per cent, the Government will have to fork out Rs 11,880 crore.

There are unconfirmed reports that the bank has scaled down its rights issue size to between Rs 9,000 and Rs 14,000 crore.

“The Government is very positive (about the rights issue). It will happen this fiscal year,” Mr Chaudhuri told reporters on the sidelines of the FICCI-IBA Banking Conference.

Earlier, Mr Diwakar Gupta, Managing Director & CFO, SBI, said the bank can ‘manage' even if the Government does not give its green signal to the rights issue.

“Currently, the bank is well-capitalised to support 16-19 per cent credit growth. However, we will definitely need capital in the next financial year. It will be a crisis situation if we don't get capital next fiscal.”

The bank could look at other options such as raising funds via the issue of retail bonds if the Government's fund infusion does not come through, said Mr Gupta.

SBI will have to provide Rs 550 crore towards countercyclical provisioning, besides the routine provisioning in the second quarter.

The bank is through with its higher provisioning, which had hit its profit in the past two quarters, Chaudhuri said. Profitability in the coming quarters should be better.

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