SBI to get Rs8,500-crore capital boost this year

28 Oct 2011

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The State Bank of India (SBI) will get a majority share of around Rs8,500-crore of the Rs20,000-crore funds allocated for recapitalisation of state-owned banks in the country.

The 2011-12 budget had made a provision of Rs6,000 crore for recapitalization of state-run banks.

However, the department of financial services in the finance ministry has sought Rs14,000 crore more for raising base capital of state-owned banks. Once approved, PSU banks will receive a total of Rs20,000 crore during the current financial year.

Post infusion of fresh funds into its capital base through preferential shares or such other instruments, SBI may go for a follow-on public offer or rights issue to further augment its capital base.

The department of financial services is looking at raising Tier-I capital of all public sector banks amidst rising fund costs of banks. Public sector banks have to ensure a minimum 9 per cent Tier I capital under Basel-III norms between 2013 and 2019.

The recapitalisation will help all banks with less than 8 per cent Tier-I capital and will apply to all banks where the government holds a minimum 58 per cent equity.

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