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SBI makes offer plan public

Mumbai, Dec. 7: SBI today said it was exploring the possibility of a follow-on public issue in the next fiscal, while announcing plans to mop up Rs 2,000-crore in 2006-07.

The fund-raising plans are primarily to meet the strong demand of credit as deposit growth has not kept pace with that of advances.

The offer will be made after Parliament amends the SBI Act that will pare down the lower limit of RBI’s stake in the bank to 51 per cent from 55 per cent. The Reserve Bank of India (RBI) now holds 59 per cent in SBI.

The plans were indicated by SBI chairman .P. Bhatt in New Delhi today where he said that the bank was toying with the idea of a public offer to raise its Tier I capital and that the issue was only possible after the amendment to the SBI Act, which would push back the exercise to the next fiscal.

Bhatt said the bank would raise another Rs 2,000 crore through Tier II capital by March this fiscal. This is less than the Rs 2,500-crore that Bhatt said was necessary to meet the Basel II requirements and credit growth when he took over as chairman in April 2006. Bhatt had then proposed two options to raise the funds, upper Tier II issue and hybrid bonds.

Bhatt said the capital infusion would obviate the problem of deposits not keeping pace with the demand for credit. “This year, the rate of growth of domestic deposits is higher than last year and NRI deposits have grown even faster. However, there is still pressure because of increasing demand for credit,” he said.

Indicating a stable rate regime in the short-term, Bhatt said high economic growth would not push up rates. “There has been a slowdown of 3-4 per cent in credit offtake due to rebalancing of portfolio. There is nothing alarming about it,” he said.

He said SBI would expand overseas and was examining options for new products such as schemes linked to gold.

In the SBI Act Amendment bill, likely to be introduced in Parliament in a couple of days, it was proposed to increase the paid-up capital of the bank to Rs 1,000 crore from Rs 526 crore. The SBI shares today closed at Rs 1,346.20 on the BSE, up 0.61 per cent from the previous day's close.

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