Bhatt: Reason to smile

Chapra (Nadia), Oct. 9: The government today gave its in-principle approval to the State Bank of India’s proposal to raise Rs 10,000 crore from the market.

SBI chairman .P. Bhatt today said the entire sum would be raised as equity capital. He was speaking to reporters on the sidelines of a function at Chapra near Krishnanagar (Nadia).

Bhatt had earlier said the bank would tap the capital market between November and January next year.

According to the SBI chairman, the government will take a final call on whether the fund will be raised through a public offer of equity shares or a rights issue.

“The government will have to take a decision whether it’ll want to subscribe if it is a rights issue. We have kept all options open,” Bhatt said.

The government, which has 31.44 crore SBI shares, is unlikely to prefer a rights issue as it requires fresh investment of crores of rupees.

“However, the mode of raising the fund is yet to be finalised,” said Vinod Rai, financial services secretary to the ministry of finance, in New Delhi. Rai added that the capital would be raised before March 2008.

Under the provisions of the State Bank Act, the government’s stake in the bank can be brought down to 55 per cent from the present level of 59.73 per cent. “If the amendment to the act, which is pending before Parliament, comes through, it can be lowered to 51 per cent,” Bhatt said.

“At the current market price of SBI shares, we can raise between Rs 8,000 crore and Rs 10,000 crore by diluting a 4 per cent stake of the government in the bank,” he added. The bank also plans to raise another Rs 5,000 crore as debt during the current fiscal through Tier-II bonds.

The bank today adopted the Majhidaha village in the Nadia district under its financial inclusion programme, SBI Ka Aapna Gaon.