The government has cleared the Rs 16,000-crore rights issue of the nation's largest lender SBI in which it will invest around Rs 10,000 crore.
NEW DELHI: The government has cleared the Rs 16,000-crore rights issue of the nation's largest lender State Bank of India (SBI) in which it will invest around Rs 10,000 crore to maintain its stake at over 59 per cent.
"We have decided to subscribe to the rights issue. We intend to issue bonds of Rs 10,000 crore for the purpose," Finance Minister P Chidambaram on Friday said, adding this will not entail any outgo from the exchequer this fiscal.
"We are subscribing to the rights issue, but we will pay to it on deferred basis," he said, announcing a decision taken by the Union Cabinet last night.
These bonds would be redeemed through the proposed Securities Redemption Fund, he said, adding SRF would be funded through taxes and dividends received from SBI.
Annual cost of servicing these bonds would come at around Rs 790 crore, he said, adding the government is required to put at least this much amount to the redemption fund.
The details of the offer would be decided by the SBI Board of Directors, he said.
The bank has been exploring various options to mop up funds, but a rights issue would allow the bank to raise capital without diluting the government shareholding.
It is understood that the government was not in favour of a follow-on public issue, where its stake would have been diluted from the current over 59 per cent to 55 per cent, the minimum prescribed under the SBI Act.
Earlier this year, the government purchased 59.7 per cent stake of Reserve Bank in SBI in a revenue-neutral exercise. SBI is the largest bank in the country, but ranks only 70th globally in terms of capitalisation.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}