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Rediff.com  » Business » Govt to infuse Rs 4,500 cr in SBI by March-end: Finmin

Govt to infuse Rs 4,500 cr in SBI by March-end: Finmin

Source: PTI
October 11, 2011 19:37 IST
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SBIThe government will infuse Rs 3,000-4,500 crore (Rs 30-45 billion) in the State Bank of India by the March end to help the lender achieve eight per cent capital adequacy norm, a senior Finance Ministry official said.

"SBI will need something like Rs 12,000 crore or Rs 120 billion (to achieve eight per cent capital adequacy). Internal accrual will be around Rs 7,500 to Rs 9,000 crore (Rs 75 billion to Rs 90 billion). . .so the gap (of Rs 3,000 crore-4,500 crore or Rs 30-45 billion) will certainly have to be funded by us," Financial Services Secretary D K Mittal said on Tuesday.

The process of capital infusion in SBI, he added, would be completed by December or maximum by March-end.

Asked whether the capital infusion would be through a rights issue, he said, "(SBI) may not be going for public issue or rights issue. This may not be the right time to raise money from the market".

The government, he added, 'is looking at various options to capitalise SBI, which will be slightly innovative...public sector banks would fully capitalised'.

The government, which holds 59 per cent stake in the bank, will have to pump in more capital to enable it to expand its business and maintain Tier-I (equity)

capital at eight per cent.

Recently, Moody's had downgraded the credit rating of SBI citing inadequate capital and poor asset quality as reasons.

Following the downgrade, major private sector lenders like ICICI Bank, HDFC Bank and Axis Bank now stands at a higher level.

Responding to questions on SBI's downgrade, Mittal said, "We are really concerned and pained at the way SBI has been downgraded.

The SBI has been unnecessarily downgraded." Tier I capital of the bank declined to 7.6 per cent at the end of first quarter, against the minimum norm of 8 per cent.

Over all Capital Adequacy Ratio (which includes both Tier I and Tier II) of SBI stood at 11.6 per cent as on June, 2011.

At the same time, SBI's non-performing assets reached three-year high of 3.52 per cent of loans for the quarter ended June 30.

SBI had raised over Rs 16,000 crore (Rs 160 billion) through rights issue in 2008.

The government's contribution was in the form of bonds to the bank instead of cash.

The SBI has already submitted a response to the government on the rating downgrade, and started implementing measures to improve the bank's efficiency.

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