The Government is expected to infuse Rs 4,000 crore into State Bank of India this fiscal. This will boost the bank’s capital adequacy ratio to over 13 per cent, according to a top bank official.
“The mode (of infusing capital) is being discussed and we have given various options. It is the government’s call to decide on how to infuse that equity,” said Diwakar Gupta, Managing Director, SBI.
The country’s largest bank’s has been awaiting the Government’s nod for the rights issue for more than two years.
When asked if the rights issue would be appropriate in the current volatile market conditions, Gupta emphasised that issue size is only Rs 4,000 crore. On a rights basis, it would work out to about 1 share for every 19 or 20 shares.
“So, it is a very small issue…But the rights issue is a very fair way of offering capital. There are pros and cons of every mode (of capital raising) and that is being evaluated,” Gupta said.
The Rs 4,000-crore capital infusion is adequate for the bank and will take its capital base above 13 per cent, Gupta added.
As on September 30, 2012, SBI’s capital adequacy ratio stood at 12.63 per cent, against 11.40 per cent in the year-ago period. CAR is a key indicator of a bank’s financial strength expressed as a ratio of capital to risk-weighted assets.
The government earlier this week had said it would finalise the capital infusion plans for public sector banks this week. The budget has earmarked nearly Rs 15,800 crore for shoring up the core capital base of the state-run lenders hit by bad loans and poor asset growth.
On the revival of the economic conditions, Gupta said the effect of the reforms announced will take time to impact the real economy. “We see some revival in 2-3 months,” Gupta added.