State Bank of India managing director T.S. Bhattacharya (right) with C.K. Dhanuka, chairman of Ficci (eastern region), in Calcutta on Monday. Picture by Kishor Roy Chowdhury

Calcutta, July 24: The State Bank of India (SBI) has sought the finance ministry’s approval to float a rights issue to meet its core capital requirements in the near future, managing director T.S. Bhattacharya said on the sidelines of the third banking conclave organised by the eastern regional council of Ficci.

“We won’t need to increase our tier I capital till 2007-08 as we have enough funds to support business growth for another two years. We will also plough back our profits. But all public sector banks, including SBI, will need to increase their tier I capital after 2008 to provide for market and other risks under the Basel II norms,” Bhattacharya said.

“However, while the government’s stake in public sector banks cannot be brought down to below 51 per cent (55 per cent in case of SBI), the banks also cannot easily float a rights issue as the government will not be able to subscribe to it because of paucity of funds,” he added. At present, the Centre holds a 59.73 per cent stake in SBI through the Reserve Bank of India.

“SBI and a few other public sector banks have approached the finance ministry for its nod to issue rights shares,” Bhattacharya said. If the government doesn’t subscribe to such an offer, its shareholding in the bank concerned will come down after the issue.

If the rights issue is not given the go-ahead, SBI will raise funds through innovative perpetual debt instruments in foreign currency ? a move that the Reserve Bank permitted last week.

SBI will, however, raise about Rs 3,000 crore tier II capital this fiscal.

The country’s largest commercial bank will also enter the venture capital financing business for which its subsidiary, SBI Capital Markets Ltd, has recently floated a 100 per cent subsidiary called SBI Venture.

“SBI Venture has tied up with Soft Bank of Japan to float a $100-million fund for pharmaceutical companies,” Bhattacharya said. The fund will come up in August this year, he added. “More such funds targeting other sectors will be floated in collaboration with foreign financial institutions in future,” he added.

Meanwhile, .P. Bhatt, the new chairman of SBI, has decided to put on hold the bank’s overseas acquisition spree for another three months. “How the bank goes about with its overseas acquisition plan will depend on how he (Bhatt) wants to commit capital in future,” Bhattacharya said. SBI will soon increase the number of its overseas branches from 70 to 100.