The government will infuse R3,000-4,500 crore of capital in the State Bank of India (SBI) by March 2012, but it may not be through a rights issue or a follow-on public offer, secretary in the department of financial services, DK Mittal, said on Tuesday.

?(SBI) may not be going for public issue or rights issue. This may not be the right time to raise money from the market,? said Mittal. SBI shares are trading at nearly half of its 52-weeks peak price of R3,515. SBI stock closed up 0.60% at R1,765.10 at the BSE on Monday. Mittal said the government is discussing various ?innovative? options to capitalise SBI. The government reluctance to provide pure equity is due to its bloated fiscal deficit, which is expected to overshoot the 4.6% target in 2011-12.

Even as lack of financial muscle is forcing government to find ways of capital infusion into the country?s largest lender, its choices may be limited as infusion of only pure capital will boost the bank?s tier-I capital.

The other options could be the government providing perpetual debt to SBI or infusing funds by subscribing to a hybrid instrument. But perpetual debt would not be counted towards tier-I capital under Basel III norms that kick in from 2017.

SBI, though, is pressing the government for a rights issue. Last week, rating agency Moody?s downgraded SBI?s standalone rating on concerns of ?modest capital and weakening asset quality?. The capital infusion into SBI is part of the government plans to pump in R16,000-18,000 crore by March in half-a-dozen state-owned banks. This woudl require the government to seek an additional budgetary support of R10,000-12,000 crore, as only R6,000 crore was provided towards recapitalisation of banks in the Union Bugdet in February.

A committee in the department of financial services is preparing the capital infusion plan for the banks.

Capital infusion into the SBI has become critical after its tier-I capital adequacy ratio fell to 7.6% of the risk weighted assets as on June-end, below the 8% mandated by the government. Tier-I capital comprises equity, disclosed reserves and perpetual debt. The overall capital adequacy ratio, including the tier-I and tier-II capital, of SBI stood at 11.6% as on June, 2011. At the same time, SBI?s non-performing assets (NPAs) reached a three-year high of 3.52% of loans for the quarter ended June 30.

SBI has a 21% market share of the total non-food credit in the system, much above 7.2% of the second largest bank in the country, ICICI Bank. ?SBI will need something like R12,000 crore (to achieve 8% capital adequacy). Internal accrual will be around R7,500 to R9,000 crore. So, the gap (of R3,000 crore-4,500 crore) will certainly have to be funded by us,? Mittal said.