SBI's Rs 5,000-cr rights issue by March

State Bank of India said on Tuesday that raising Rs 5,000 crore through the rights issue, in the first phase by March, would be sufficient to help it achieve 8 per cent capital adequacy.

“Although the government has not officially said anything on the rights issue proposal yet, capital infusion of Rs 5,000 crore would take our Tier I (equity) capital over 8 per cent by the end of the current fiscal,” SBI Managing Director and Chief Finance Officer, Mr Diwakar Gupta, told PTI.

“The rights issue could be 60:40 ratio,” he said, adding that the government could give Rs 3,000 crore and remaining Rs 2,000 crore could come from retail investors. With 59 per cent equity, the government is the largest shareholder in SBI.

Gupta said the first tranche of Rs 5,000 crore for capital raising exercise could be adequate for meeting norms, although SBI requires Rs 20,000 crore in 2—3 years.

SBI had given a proposal for Rs 20,000 crore rights issue a few months ago and it is being examined by the government.

With the deterioration in its asset quality, and Tier I capital coming down below 8 per cent, global ratings agency Moody’s downgraded the creditworthiness of SBI by a notch to ’D+’ last week.

Tier I capital of the bank declined to 7.6 per cent at the end of first quarter, against the minimum 8 per cent level desired by the government. Over all Capital Adequacy Ratio (CAR) (both Tier I and Tier II) of SBI stood at 11.6 per cent as of June, 2011.

At the same time, SBI’s NPAs reached three year high of 3.52 per cent of loans for the quarter ended June 30.

It is government’s stated intent that it is committed to providing adequate capital to all public sector banks so as to maintain their Tier—I capital at 8 per cent, and it’s stake at over 58 per cent.

SBI had risen over Rs 16,000 crore through a rights issue in 2008. The government’s contribution was in the form of bonds to the bank instead of cash.

The bank has submitted a response to the government on the rating downgrade, and already started implementing measures to improve the bank’s efficiency.

On stressed assets, SBI Chairman, Mr Pratip Chaudhuri, had said the bank is taking appropriate steps to bring down its net NPA, which was 1.63 per cent at the end of March.

“We propose to take various measures including we have put a Deputy Managing Director in—charge of the stressed asset management and we are giving much focused attention,” he had said.

The bank intends to bring down its net NPA to 1.5 per cent by the end of the current fiscal.