The crucial meeting between Union finance minister Pranab Mukherjee and the board of directors of the State Bank of India (SBI) on August 6 in New Delhi is expected to focus on key issues like the bank?s strategies on fund raising plans including the rights issue of R21,000 crore, recovery of non-performing assets (NPA) and support from the government for the next couple of years.
This is the second time in the last four years that any finance minister is meeting the SBI board. Former finance minister P Chidambaram met the SBI board in 2008.
?The agenda for the meeting is yet to reach us from the FM?s office. It should focus on some burning issues like what the bank is doing to manage its NPAs and what kind of support the ministry would provide not just for this year but for the next couple of years,?? said a senior official of the bank.
SBI is currently working on its R21,000-crore rights issue where government has to contribute its part to retain its stake at the existing level of 59%. However, the rising fiscal deficit has made government?s contribution a remote possibility.
?If SBI does not get full capitalisation support from the government, it will look at instruments like FPO or private placements and other instruments,?? SBI chairman Pratip Chaudhuri had recently indicated.
Earlier speaking to FE, Diwakar Gupta, managing director and chief financial officer, revealed that the bank has just R4,400 crore under Tier-I capital, and it can raise another R6,000 crore in Tier-I capital.
In order to provide towards pension liabilities, SBI had to take out R7,500 crore from the Tier I capital during the last quarter of 2010-11. This had brought down the bank?s tier I capital adequacy ratio (CAR) to 7.72% from the benchmark 9%.
Similarly, the bank has got a headroom for raising capital to the tune of R14,000-15,000 crore under Tier-II capital. ?We need around R16,000-17,000 crore of extra capital this year to do our business. But we have not taken any decision as as yet. I think, we will have better understanding about our capital plans by the end of the second quarter. We expect a lot of recoveries from our NPAs?? said Gupta.
Anis Chakravarty, director of Deloitte Haskins & Sells, said under such circumstances the finance minister is expected to explain the government?s position on the bank.
