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STATE Bank of India - 2008 with a big plus - 500 posts per page (page 2)

SBI gets approval of government for public offer
22 Jul 2009, 0735 hrs IS, Prabhakar Sinha, TNN


NEW DELHI: The government, it is learned, has allowed SBI to make a public issue of fresh equity shares, leading to dilution of government's
stake to 51% from 59.4% at present. In the process, SBI can raise over Rs 17,000 crore at its present share price of Rs 1,708.

A senior government official said that SBI approached the finance ministry to get nod for raising funds to support its business growth. The bank has enough capital adequacy ratio (CAR) at 12.97% under Basel I norm.

As the bank's deposits are likely to grow at over 20% in the current financial year, its CAR will fall to around 10%. However, as per the finance ministry's prudence norms, all the bank should maintain a CAR of 12%. As against, SBI said it would like to maintain its CAR at 13%. To maintain this, SBI has to raise funds from the market.

Finance secretary Ashok Chawla said disinvestment process will start in listed PSUs with dilution of government stake. He said in the first tranche, companies in which public holding is low, will be taken up. There are large number listed companies like MMTC and NMDC where public holding is less than 5%. However, he maintained that the final decision will be taken by the Cabinet.

In the banking sector, the government has created its own problems. While government wants to maintain a minimum of 51% holding in banks, it also wants to maintain a minimum CAR of 12%. Therefore, in many banks, where government's holding is close to 51%, it has no choice but to recapitalize them, which will further enlarge its fiscal deficit, already at 6.8% of GDP.

In SBI, to keep government's holding at 51%, the bank can issue 10.47 crore fresh shares. In 2008, SBI had raised Rs 16,736 crore through rights issue. Out of this, around Rs 9,900 crore was contributed by government. The rights issue shored up the CAR to around 14%. But as business grew, the CAR came down by March 2009 to 13%. This made SBI to seek permission from government to raise capital to improve its adequacy ratio.

SBI A 1,696.50 1,708.40 -11.90 -0.70