Managing director and group executive (national banking) SR Iyer told The Financial Express that the bank will come out with the tier-II issue for the purpose towards the end of the year. The bank requires to raise the capital in order to grow its loan portfolio as it has to maintain its risk-weighted capital adequcy ratio at a minimum level of nine per cent now. The subordinated debt is likely to be raised through a combination of public issue and private placements, depending on the market condition.

The bank will decide on the issue size after taking into account its asset growth by the end of the third quarter of the current fiscal.

Iyer said the credit market is expected to pick up in the third quarter and demand is likely to continue till the end of the current fiscal. He said it will not be prudent to raise such a huge amount when the market is at its low and deploy the same in the call money market at the rate of 8 to 8.5 per cent.

The bank prefers a tier-II issue to an American Depository Receipts issue this year since ADR will require consolidating the entire group's accounting information in accordance with the GAAP, and this may take a lot of time. SBI has seven associate banks along with several subsidiaries. Hence consolidating their accounts could turn out to be a huge exercise even though similar accounting principles are followed in these companies.

SBI's plan to raise equity funds from the global markets is unlikely to materialise as the government is reluctant to shed its stake in the bank.

The Reserve Bank of India holds about 59.7 per cent stake in SBI. Earlier, it was decided that the RBI will reduce its holding to less than 55 per cent. "But the signals are now not very clear," Iyer said. The government says it would shed its stakes in all the public sector banks except SBI. This indicates that the government wants to treat SBI differently, he added.

The SBI managing director, who was here on a four-day visit last week, said the bank has comfortably deployed almost all the Resurgent India Bond (RIB) funds of Rs 18,000 crore. About Rs 3200 crore has been provided for infrastructure projects although they are yet to take off, he said. A provision of Rs 320 crore has been made for RIB commitments and the bank proposes to make an annual provision of Rs 200 crore for the RIB funds.