SBI preferential issue to government priced at Rs2,191.69 per share

State Bank of India (SBI) will issue preferential shares to the government at Rs2,191.69 apiece, to raise about Rs7,900 crore, as part of the state-run lender's capital raising exercise.

SBI, the country's largest lender, is awaiting capital infusion by the government before 22 March 2012 and had convened an extraordinary general meeting of its shareholders and executives on 19 March for approving preferential allotment of shares to the government.

A senior official at the bank had said once the proposal was approved, the government would inject Rs7,900 crore into the lender. This was expected to happen within three days of the EGM.

The government is injecting funds into SBI by subscribing to its shares as part of a move to shore up the capital base of state-run banks eroded by fast growth and worsening asset quality.

SBI, which accounts for 25 per cent of loans and deposits of banks in the country, was downgraded by Moody's Investors Service in October last year because of its thin capital base and worsening asset quality.

The bank has been seeking government funds to replenish its balance sheet, which has been eroded by rapid loan growth and increased provisions for defaults.

SBI on Monday reported a 15.4 per cent year-on-year increase in its net profit for the October-December 2011 quarter at Rs3,263 crore. Non-performing assets, or bad loans, however, shot up 58 per cent to Rs40,098.43 crore, which is 4.61 per cent of the bank's total advances.

The SBI stock closed up 0.2 per cent at Rs2,260.50 ahead of the news.