The Hindu Business Line : SBI to raise Rs 5,000 cr tier-II capital in January

Guwahati, Jan. 3 State Bank of India will raise Rs 5,000 crore tier-II capital in January to fund its growth needs, according to its Chairman, Mr O.P. Bhatt.

The capital will be raised primarily by way of tier-II bonds and the bank also plans to target retail customers for the issue. “These will be long term investment at a fixed coupon rate. We are also targeting retail investors for the issue and the investments could range anywhere between Rs 10,000 and Rs 1 lakh,” Mr Bhatt said while briefing newspersons here on Friday.

The bank is hopeful of mobilising about Rs 500-1,000 crore by way of retail customers. “This issue will help broadbase our investors and if it proves to be successful, we can revisit the scheme again. It will also add a new product to our bouquet of services,” he added.

SBI also plans to raise tier I capital in the financial year 2009-2010. “We will examine our position post March but we need to raise some tier I capital next fiscal,” Mr Bhatt said. The bank had raised Rs 3,500 crore in December 2008. The bank, according to the Chairman, would continue to grow at about 40 per cent on a quarter-on-quarter basis.

The net interest margin (NIM) of banks was under pressure, he pointed out. SBI’s NIM was at 3.16 per cent for the quarter ended September 30, 2008. “Lending rates have gone down but cost of deposits is still high and this will put some pressure on margins, however, we can provide some cushion by raising more low-cost Current Account and Savings Account (CASA) deposits and by lending in those sectors where high interest rates are affordable,” he observed.

Asset growth

There has been a slowdown in asset growth of banks beginning July this year, the SBI Chairman pointed out. “The global crisis has impacted the Indian economy but it is not alarming. It has affected some specific sectors such as export, gem and jewellery, textile, handicrafts and logistics,” he said.

The asset quality was also under stress, he observed. “There could be some pressure in these sectors. Now we need to see if they make lower profits or losses or turn into NPAs,” he said.

Talking about the revival of its credit card business, Mr Bhatt said the bank expected the credit card business to break even in the next financial year.

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