Bank to raise Rs 2,000 crore in Tier II debt by March 2007.
Bank to raise Rs 2,000 crore in Tier II debt by March 2007.
NEW DELHI: State Bank of India could raise fresh equity capital in the fiscal year starting next April once a banking law is amended, chairman O P Bhatt said on Thursday.
Bhatt said the state-run lender was waiting on the government to implement planned changes to legislation that would allow it to more easily raise various types of capital. “We are considering various options to raise the authorised capital ... we will look at that next fiscal,” he told reporters at a business conference when asked if the bank was considering an equity issue, but gave no further details.
The Reserve Bank of India owns 59.73% of SBI but plans to transfer the stake to the government. Bhatt said SBI could raise fresh capital and still ensure that either the central bank or the government’s holding was 55%.
SBI also plans to raise Rs 2000 crore in Tier II debt by March 2007, the end of the current fiscal year, he said.
SBI and other lenders are raising funds to meet demand for credit from companies and consumers as the economy expands at an annual pace of more than 8%.
Bank loans have risen more than 35% in each of the past two fiscal years.
The country’s banks also need to raise capital to comply with higher capital standards that take effect in 2008. The new standards will require them to set aside more reserves against loans and investments.
On interest rates, Bhatt said the bank’s asset-liability panel had not decided whether to revise deposit or lending rates. “Interest rate is a function of liquidity position and credit growth,” he said.
“Short term rates will remain fairly stable. We need to keep it stable.”
SBI targeted 25% loan growth in this fiscal year, which managing director Yogesh Agarwal said in November it’s likely to outpace. Outstanding loans at SBI rose 21% to Rs 2.9 lakh crore in the year to September, the company said in October.
Meanwhile, SBI has revised the yield guidance for its $300 million, five-year floating rate note on the back of robust demand, a market source said on Thursday.
SBI was expected to price the deal on Thursday or Friday at a spread of 48 to 50 basis points over three-month LIBOR (London Interbank Offered Rate) after the offer had attracted $700 million of orders, the source said.
SBI had initially set the price guidance at 50 to 55 basis points over three-month Libor. Barclays Capital, Citigroup and Deutsche Bank are handling the proposed transaction. —With agencies
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