The Hindu Business Line : SBI may consider rights to shore up Tier-I capital

State Bank of India may consider a rights issue as one of the ways of shoring up its Tier-I capital. It has taken its case before the Government, the single-largest shareholder controlling close to 60 per cent.

The Government's stake will not go below 51 per cent, Mr T.S. Bhattacharya, Managing Director, maintained while repeating the Government's stated objective with regard to its holding in the bank. A rights issue will necessitate a hefty investment by the Government.

"We should be able to easily meet our capital-raising needs," he told newspersons, adding that SBI will look at various options to mobilise Tier-II capital in the coming days.

The bank has incidentally ruled out a merger of subsidiaries, especially because these are already on a common technology platform and follow a similar set of regulations.

SBI, which has lately seen a significant expansion in customer base, is aware of the risks involved in lending to certain services industries, Mr Bhattacharya said while addressing a meeting organised by FICCI on Monday.

Public sector banks, SBI included, are equipped with huge manpower, a portion of which may be considered redundant by their private-sector counterparts.

However, even PSBs have been trying to re-orient their businesses to meet competition. In effect, even conventional bankers are moving away from plain-vanilla lending.

Various product innovations are being tested, the SBI MD commented, while referring to the wider range of options made available to customers, bancassurance and technology-driven payment systems.

In future, PSBs will find good scope to conduct business in retail banking, rural financing and infrastructure financing. SMEs and exports will also account for a fair share of PSB's operations.

ATM distinction

SBI and its associates are already a leader in the Asian region in terms of the number of ATM transactions that are being processed every day, Mr Bhattacharya indicated, while referring to the Rs 140 crore or so that gets involved in such transactions.

The trend has evolved in the context of greater spending on technology by Indian banks, including the public-sector players.

The latter have been using technology to turn out specialised branches, forge strategic tie-ups and introduce new products aimed at specific user groups.

The bank has been recruiting personnel for specific purposes - treasury, project finance and agri financing.

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