The largest French bank by market value, BNP Paribas said today that it would raise $6.27 billion in a rights offer in order to repay the French government bailout funds.

The liquidity crunch faced by global banks in the wake of the collapse of the US sub prime mortgage market that led to the collapse of Bear Sterns and Lehman Brothers, compelled the French government to bail out Paris-based BNP Paribas by pumping in on two occasions a total of $12.4 billion, of which, $7.5 billion was loaned in March 2009 to boost the bank's capital reserve.

By raising $6.27 billion through a rights offer, the BNP Paribas board aims to repay the loan as well withy an interest of $330 million, the bank said in a statement today.

BNP Paribas is offering its shareholders 1 new ordinary share for 10 existing shares at a subscription price of €40 per share- representing a discount of around 29 per cent to BNP's Monday's closing price of €56.57.

The bank itself will be lead manager for the offering of 108 million new shares, while the French financial giant, AXA Group, which holds 5.2 per cent of the bank's common shares, will subscribe to new stock ''by exercising all of the preferential subscription rights it will be granted,'' said the bank.

As part of the bailout deal with the French government, BNP had agreed to increase lending to households and companies by at least 3 per cent this year and said that it would stand by its commitments to the French government.

Since the last 12 months, BNP has increased its loan advances in France by €5.5 billion.

BNP Paribas's chief executive Baudoin Prot said, "State intervention to provide equity and liquidity, key in the midst of the financial crisis, has fully achieved its objectives. Given the changing environment and the strong performance of BNP Paribas, this support is no longer required.''

"BNP Paribas' sound financial position means it can continue to play its role in supporting the economy in France and in the other major countries where it has a presence.

Following the rights offer, BNP Paribas Tier 1 ratio will be over 9 per cent, the bank said.