The Rs 15,000 crore fund-raising by the country’s largest lender SBI is credit positive for the bank and will eliminate its dependence on capital infusion from the government, Moody’s said today. In a report, the US-based agency said any capital infusion from the government will further strengthen the bank’s capitalisation. Last week, State Bank of India raised Rs 15,000 crore through qualified institutional placement (QIP). “The capital increase is credit positive for SBI because it strengthens the bank’s capitalisation and supports credit growth, given the increasing requirements for equity under Basel III,” the rating agency said.
This would help the lender meet the Basel III minimum equity capital requirement of 7.8 per cent at the end of March 2018 and 8.6 per cent at March-end of 2019, it added. “The capital raise also will eliminate the bank’s dependence on capital infusions from the Indian government to meet the Basel III minimum requirement… As such, any infusion from the government will further strengthen the bank’s capitalisation,” Moody’s added.
SBI’s risk-weighted assets are expected to grow by 15 per cent in 2017-18 and 2018-19, in line with 2016-17, it said. “These growth assumptions and our expectation that credit costs will remain a key drag on the bank’s profitability lead us to estimate that SBI’s tier 1 equity ratio will be about 10.1 per cent at the end of March 2018 and 9.5 per cent at the end of March 2019,” Moody’s said further.