The Telegraph
Monday , May 19 , 2014
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SBI funding options

Bhattacharya: Cash call

New Delhi, May 18 (PTI): The country’s largest bank SBI has said it is not looking to set up a special purpose vehicle (SPV) for its real estates, an option being considered by the finance ministry as a means of raising capital from markets.

“We are not considering that option of SPV,” State Bank of India chairperson Arundhati Bhattacharya said.

The idea of setting up an SPV for raising capital from markets was floated at a meeting of finance minister P. Chidambaram with heads of public sector banks last week.

Under the proposal, a bank could set up an SPV to which it will transfer its real estate assets. The bank then can pay rental or lease to the SPV to create an income stream.

Based on this income, the SPV will raise money from the markets.

The SBI, however, plans to set up a holding company for the purpose of raising capital.

“It (setting up a holding company including all subsidiaries) is one of the possibilities (for raising capital). At present, there is no clear view on this,” she had said.

The State Bank will require regulatory clearances for setting up a holding company.

Last week, financial services secretary G.S. Sandhu had said various options such as ESOPs, the SPV model and the holding company model were discussed in the meeting with the finance minister.

He had said the government could infuse an additional capital of around Rs 8,000 crore into public sector banks in 2014-15 to expand their capital base. The remaining funds had to be raised by banks from the markets.