SBI plans rights issue, merger of subsidiaries

04 September 2007

Mumbai: State Bank of India (SBI), the country''s largest lender, is likely to go for rights issue to raise funds for meeting capital requirements, official sources said.

"It would most probably be the rights issue," a key official said amid speculation over the mode of raising resources. However, the quantum and timing of the issue is yet to be finalised, the official added.

The rights issue would allow SBI to raise Tier-I capital without diluting government stake, which currently stands at 59.73 per cent. The government had recently bought RBI''s entire holding of 59.73 per cent in SBI.

The government may dilute its stake up to 55 per cent and a bill to further dilute government''s stake in SBI up to 51 per cent is pending in Parliament.

The bill was referred to the standing committee whose report was tabled recently. Last month, SBI chairman O P Bhatt said the bank will decide in two months whether to go for a rights issue or follow-on public offer for rising funds.

"It is still taking shape. The decision would be taken in a month or two," he had said. Besides, the bank plans to raise about Rs15,000 crore during the current fiscal through a mix of Tier I and Tier II bonds to meet capital requirement.

SBI has set up a target to raise over Rs89,000 crore in the next five years. "Based on the sensitivity analysis of its capital position, capital augmentation programme of SBI envisages raising about Rs89,600 crore as capital funds during the next five years," Pawan Kumar Bansal, minister of state for finance had informed the Lok Sabha in a written reply.