Indian Banks

Bank to decide on special home loan scheme by month-end.

State Bank of India Chairman OP Bhatt today said the country’s largest lender would prefer to raise capital through a rights issue of equity shares, rather than dilution of the government holding, to fund growth.

“I want the government to continue to be the major stake holder in SBI … If there is an opportunity to raise capital quickly and efficiently, we will like to do that (rights issue) … It gives us a lot of flexibility in future,’ he told reporters on the sidelines of a seminar on capitalism organised by the Confederation of Indian Industry (CII).

The Union government had introduced a bill to dilute its minimum permissible equity in the bank from the present 55 per cent to 51 per cent, among other changes in the SBI Act. The present equity of the government is about 59 per cent.

On a global offering, Bhatt said the bill provides room to raise funds through American Depository Receipts. “Our Global Depository Receipts are already listed. The provision will also give us an option to tap the American market. However, there are no plans for using this route.”

Bhatt indicated the bank was unlikely to go for a rights issue soon, as it had enough capital and a good liquidity position. “The bank has a five-year perspective. We do not need capital immediately, because our capital adequacy ratio is now around 14 per cent,” he said.

On the merger of State Bank of Indore with the parent, he said the Reserve Bank of India had given its in-principle nod for the merger between the two entities. The proposal needed to be cleared by the government and the boards of both banks.

Referring to a new scheme floated to settle dues from small and medium size enterprises, he said the bank offer would be a one-time settlement for bad loans from these units, to provide relief to small firms hit by the global financial crisis.

On the extension of SBI’s special home loan scheme, Bhatt said they would decide by end-March. Under the scheme, the bank offers an eight per cent fixed rate for home loans for a fixed period. SBI has got good response to the scheme, under which it disburses around Rs 2,500 crore a month, he said.

(BS)

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State Bank of India (SBI) may go for a rights issue in the next financial and will start discussions with the government after the presentation of the Union Budget.

Talking to reporters at the sidelines of a seminar, Chairman OP Bhatt said, “We need some equity and we need it in the next financial year. Our rights issue can be successful, if the government subscribes to it.” Bhatt expects the government to give some indications regarding capital infusion in public sector banks in the Budget.

“There may be some announcements on whether the government wants to give money for bank capitalisation. Based on that, we will start discussions with the government after the Budget,” Bhatt said. The lender seeks to raise Rs 10,000-20,000 crore from the rights issue. Bhatt also said the bank needed to raise around Rs 40,000 crore in the next five years in addition to Tier-II capital and retained earnings.

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Country’s largest lender State Bank of India (SBI) today said the proposed base rate for the bank seemed to be around 8 per cent.

SBI Chairman OP Bhatt said this on the sidelines of an AIMA event here.

The Reserve Bank of India (RBI) has proposed to replace the benchmark prime lending rate (BPLR) with base rates from April this year.

The base rate is the lowest rate that a bank can charge from a customer and is intended to bring about more transparency in the lending operations of banks. SBI was at present looking into all the aspect of the base rate system proposed by RBI and was yet to take a final call based on asset liability situation, he said.

Asked if SBI has approached RBI for more time to migrate to the base rate regime, he said, “We do not intend to approach RBI, but possibly other banks may seek some relaxation for compliance.”

Further, he said the base rate would not translate into higher interest rate.

Asked about the merger of the State Bank of Indore with itself, Bhatt said, the merger should take place by March this year. The bank was currently seeking regulatory approval from RBI and thereafter it would go to the government for clearance, he said.

(BS)

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