RETAIL BANKING | Tony Chua, India

SBI plans $4.47bn rights issue by yearend

The lender secured government backing on the capital raising activity following posting of one of the lender’s lowest Q4 profit last month.

State Bank of India (SBI) on Wednesday said that it is planning to raise Rs 20,000 crore ($4.47 billion) through rights issue.

Speaking to media persons after donating an ambulance to the SDS Tuberculosis Research Center and Rajiv Gandhi Institute of Chest Diseases by the State Bank of Mysore, SBI chairman Pratip Chaudhri, said that the rights issue would be completed by December this year.

“Rs 12,000 crore ($2.68 billion) of the Rs 20,000 crore ($4.47 billion) would be borne by the government,” he said and added that one round of preliminary talks with the government was complete and that the latter had assured them necessary support.

The government owns 59.40 per cent stake in the bank. SBI had reported one of its lowest Q4 profit in over a decade last month. It had cited high provisioning for pension as the reason for the same. But Chaudhri clarified that the worst of the provisioning impact was over.

Terming that the pension provisioning came as a ‘surprise’, he said that the impact was felt and done away with in Q4 of FY2010-11 and the same would not be felt by Q1 for FY2011-12.

Later on in the day, Chaudhri, who attended another event in SBI Head Office in Bangalore, stated there could be no drop in interest rates as it was part of the Reserve Bank of India’s efforts to contain inflation.

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