SBI may tap market for Tier I capital next year

Mumbai: The State Bank of India, the country's largest bank, proposes to enter the equity market with a public issue of shares next fiscal for raising Tier I capital. SBI is awaiting Parliament approval for amendments to the SBI Act.

"For raising Tier I capital we are awaiting approval for the bill. We would not be able to do so before next financial year," SBI chairman O P Bhat said on the sidelines of the LSE Asia Forum.

He said the Tier I capital would most probably be raised through a public offer.

The Reserve Bank of India (RBI) currently holds 59 per cent in SBI and, according to provisions of the SBI Act, it cannot fall below 55 per cent. This leaves only a small leeway for the bank issue fresh shares.

The proposed amendment might bring down RBI's minimum equity holding in SBI to 51 per cent, he said.

SBI would raise another Rs2,000 crore worth of Tier II capital by March this fiscal. The fresh capital would address the problems posed by deposits not keeping pace with the rising demand for credit, Bhat said.

Meanwhile, Bhat said, SBI is planning to start operations in Israel by March 2007 and wants to enter Pakistan. He, however, ruled out acquisitions abroad.

The state-run bank is expanding in countries with which India's trade and investment is set to grow in coming years. "We will have a branch in Israel by March," he said.

SBI also had expansion plans for South Asia, including Pakistan, Bhatt added.