SBI to get capital infusion by March 2012

The country's largest lender State Bank of India (SBI) said the Finance Ministry has given an assurance that the bank would be adequately capitalised by March 2012, but it has not yet decided on the route it will take for the same.

"Whether it would be a rights issue, preferential or QIP route... It is still not decided," SBI Chairman said.

"But one thing has been confirmed through the finance secretary that the bank would be adequately capitalised by 2012," he said.

The government is the largest shareholder of the SBI with an equity stake of 59.4%.

"Our issue is that the government has to take a call what level of ownership it wants to maintain in the bank. If it wants to have 59.4% stake in SBI, then it would be a rights issue," he added.

"If it [the stake] is to be raised from the level of 59.4%, then it would be a preferential issue and if it has to be lowered, then it has to be through a QIP issue," Chaudhuri said.

SBI had reported a Tier-I capital adequacy ratio of 7.60% as of June 2011, against the suggested level of 8%.

It is said that such a low Tier-I capital ratio provides an insufficient cushion to support growth and to absorb potentially higher credit costs arising from deteriorating asset quality.

"Our tier-I capital had dropped to 7.6% against desired requirement of 8%... We need to grow and in doing that we need to increase our tier-I and the government of India is convinced," he said while replying to a query on the necessity for recapitalisation.

"We have presented all our options to the government, but it has its own process of decision making," he said.

SBI had raised over Rs 16,000 crore through a rights issue in 2008. The government's contribution was in the form of bonds to the bank instead of cash. Apply for SBI Home Loan Online

The government of India proposes to provide a sum of Rs 6,000 crore to enable the public sector banks to maintain a minimum Tier-I Capital to Risk Weighted Asset Ratio (CRAR) at 8% this fiscal.

Last year, the capital infusion budget of the government was Rs 20,157 crore.

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