SBI plans to tap overseas bond markets for $2 bn
18 June 2012
Country's largest lender, the State Bank of India intends to raise up to $2 billion from overseas bond markets in the next three months.
''We will be raising $1-2 billion within the next three months,'' SBI chairman Pratip Chaudhuri told reporters over the weekend.
The exact size of the bond issue has not been decided, but SBI is not expected to go for a smaller issue, as it would not help the bank of its size.
Through the fund infusion the lender intends to bolster its tier 2 capital adequacy which stood at 13.9 per cent at the end of March 2012 with core tier 1 ratio of over 9 per cent.
The chairman is hopeful of raising the required amount despite the current global economic scenario, but has not decided on the exact geography for the bond sale.
Global rating agency Moody's Investor Services cut the bank's ratings last year on concerns over its asset quality, and lower capital adequacy.
Chaudhuri said the bank has requested Moody's to reconsider the rating and upgrade the status, following the capital infusion of Rs8,000 crore from the government late last fiscal and its efforts to minimize non performing assets.
"We were not in a position to apply for a reversal of the action as our last quarter results were yet to come out and we did not have any numbers to show. Once the results were out, we have written to them," Chaudhuri said.
''It will take some time for the rating agency to take action,'' he said.
In last month's earnings conference, the chairman had said that the bank had the upper hand over non-performing assets, which had dented its bottomlines in the preceding quarters and would continue to focus on the aspect going ahead.
On margin pressures Chaudhuri said that the lender had set a target of 3.75 per cent for 2012-13 and the performance of the first two months has exceeded the target.
On the impact of the reduction in interest rates of up to 3.50 per cent it had announced last week, Chaudhuri said it would shave off up to 0.10 per cent from net interest margin, but added that such a cut in certain segments such as SME loans was necessary as the bank had high rates.
The Reserve Bank of India (RBI) is holding its policy review meeting on Monday and it is widely expected that a rate cut could be announced to stimulate the country's economic growth following dismal economic data released recently, although inflation remains a serious concern.
The country's GDP growth rate dropped to 5.3 per cent in the March quarter, the lowest in nearly 9 years.
Last month, several global agencies have cut India's growth forecasts to 6.3-6.6 per cent.
''We will be lucky to have 6.5 per cent to 7 per cent growth which is lower than the long-term target,'' deputy chairman of the planning commission Montek Singh Ahluwalia, said Sunday, ahead of the G20 meeting.
Chaudhuri believes that a cut in the CRR would be beneficial, while a cut in repo rate is only ''indicative'' of the RBI's intentions and would not have much impact on the lending rates.