SBI plans Rs20,000-crore rights issue to finance credit growth
24 Feb 2010
State Bank of India, the country's largest lender, will raise up to Rs20,000 crore (about $4.3 billion) through a rights equity issue in the coming financial year (2010-11) to finance part of its credit growth, its chairman O P Bhatt said.
He said SBI would require around Rs40,000 crore ($8.6 billion) to sustain growth in credit over the next five years.
"If we can raise half of it anytime during the next 12-18 months, it will be great," he said on the sidelines of a banking technology summit.
The success of the rights issue would depend on the support of the government, which holds 60 per cent stake in the bank, Bhatt said, adding that it expects to proceed with the rights plan after the Union Budget.
"Our rights issue can be successful only if government subscribes to it," Bhatt said.
Meanwhile, SBI on Tuesday said it expected the proposed base rate for banks to be around 8 per cent.
The Reserve Bank of India (RBI) has proposed to replace the benchmark prime lending rate (BPLR) of banks with base rates from April this year.
The base rate is the lowest rate that a bank can charge from a customer and is intended to bring about more transparency in the lending operations of banks.
Shares of SBI, which rallied 76.2 per cent in 2009 as the stock market jumped 81 per cent during the stock market boom, have dropped 15.5 per cent so far this year, more than double the 6.8 per cent fall in the Sensex.
SBI has a market capitalisation of around $26.3 billion.
