State Bank of India (SBI) is set to raise a whopping Rs 16,000 crore before the end of the fiscal to help the 200-year-old bank bolster its capital, meet credit demand and take on competition from global banks.
SBI, the country?s largest bank, which is 59.73% government owned, was given approval on Thursday night to sell Rs 10,000 crore worth of shares to the government. The bank will also offer shares worth Rs 6,000 crore to other stakeholders. ?In deferred payment, the government will subscribe fully to its share,? finance minister P Chidambaram said.
SBI gained 1.3% to close at Rs 2,300.3 on the Bombay Stock Exchange (BSE) on Friday. The stock has risen 85% since January 1, outpacing the 40% advance in the bellwether Sensex of the BSE.
The bank said last month that it had asked for permission to raise as much as Rs 20,000 crore to invest in its more than 9,500 branches and meet demand for loans from its 100 million customers.
State Bank of India?s stake sale follows a $5-billion issue in June by ICICI Bank, the nation?s second-largest bank by assets. HDFC Bank Ltd, the third largest by market value, and Axis Bank Ltd raised about $1 billion each, while Infrastructure Development Corporation of India raised $519 million by selling shares in July.
The government will pay for its shares by issuing securities to SBI. However, further details of the issue?including the number of shares, the amount, the coupon rate and tenure?would be worked out by the government in consultation with the bank.
The government said its investment in the issue would help it get dividends and taxes amounting to Rs 1,358 crore from the bank in 2008-09, against an estimated expenditure of Rs 790 crore on interest to be paid to the bank. In the following year, it would receive Rs 1,552 crore, and in 2010-11 the amount would rise to Rs 1,892 crore, the government said.
