Mumbai: The State Bank of India''s long awaited rights issue of shares to mop up additional capital will appear to have got official blessings with the Finance Minister, Mr P. Chidambaram, strongly supporting the bank''s proposal. The Minister said here on Nov 14, that the SBI Board has presented a strong case for a rights issue. SBI has displayed a strong need for mopping up capital and they have presented a case for a rights issue. The Government had purchased the 59.73 per cent stake of the bank from the Reserve Bank of India at Rs 35,531 crore in June this year.
The Government''s current holding in the bank, therefore, stands at 59.73 per cent. The Bank have an immediate requirement of Tier-I capital of Rs 10,000 crore in order to make ourselves Basel II compliant by March 31, 2008. The bank has a long-term capital need in order to fund its growth. The bank''s Capital Adequacy Ratio was 12.85 per cent (12.63 per cent) as on September 30. The Government''s nod for the rights issue may come as a relief to many public sector banks where the Government holding is at 51 per cent. A decision on SBI''s rights issue could overlay the way for other banks to propose similar capital mobilisation plans.
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