SBI aims Rs 5,000 crore through rights issue by March

State Bank of India, country’s largest public sector bank, plans to raise Rs 5,000 crore through rights issue by March 2012. Although bank needs Rs 20,000 crore over next 2-3 years; the Rs 5,000 crore rights issue is considered as its first tranche and will help bank to attain 8% capital adequacy.

The said rights issue is expected to be in 60:40 ratio. Rs 3,000 crore will be contributed by Government of India, its largest shareholder with 59% stake. SBI’s proposal to raise entire Rs 20,000 crore is being examined by government.

SBI has already raised over Rs 16,000 crore through rights issue in 2008 with the government's contribution in form of bonds instead of cash. The recent deterioration in asset quality, and Tier I capital has coerced SBI to implement measures and improve banks overall efficiency. Bank's NPAs has reached 3-year high of 3.52% of loans for the quarter ended June 30. SBI intends to bring down its net NPA to 1.5 per cent by the end of the current fiscal.