SBI rights issue pruned to Rs5,000 crore to fit government plan

State Bank of India (SBI), the country's largest lender, is expected to come out with an rights share issue of around Rs5,000 crore by December, to shore up its Tier-I capital to above 8.0 per cent during the current financial year.

State-run SBI has pruned its rights share issue size to Rs5,000 crore even as the government said it would infuse up to Rs4,500 crore into the public sector bank by end-March 2012.

While the government could give between Rs3,000 crore and Rs4,500 crore, the remaining amount could come from retail investors. The government currently holds 59 per cent equity in SBI.

SBI, which had earlier proposed raising Rs20,000 crore through rights issue, could announce fresh capital raising plans once the first tranche of Rs5,000 crore is successfully raised.

SBI would need to raise at lease Rs20,000 crore over the next few years to meet its Tier-1 capital requirements under new Basel norms.

SBI's Tier 1 capital has declined to 7.6 per cent amidst an increase in non-performing assets (NPAs) and a general deterioration in asset quality.