State Bank of India plans no further consolidation of its associate banks with itself during the current fiscal, Chairman Mr Pratip Chaudhuri has said.

This comes even as the Finance Minister, Mr Pranab Mukherjee, recently indicated that the Government would not be averse to considering merger proposals involving SBI and its associate banks in 2011-12.

The SBI management's “time and bandwidth” during this fiscal would be devoted to raising additional capital of Rs 20,000 crore through a rights issue, besides addressing issues such as asset quality and international expansion, Mr Chaudhuri told reporters after a meeting of the bank's board.

“As of now, nothing (merger of associate banks with SBI) is on the cards. It is only in 2012-13 we will start looking at further mergers. Right now we are still digesting State Bank of Indore (which was merged with SBI in March 2010),” he said, adding that SBI was also not looking at any overseas acquisitions for the time being.

Mr Mukherjee, who addressed the SBI's Central Board meeting today, expressed concern over the recent trend of increase in non-performing assets (NPAs) of banks. SBI itself has come in for scrutiny by the Reserve Bank of India in the wake of increase in NPAs in the last three years.

On rights issue, Mr Chaudhuri said this would be the preferred route for capital raising, but noted that Government as the principal shareholder may decide on other instruments also.

“We have submitted various scenarios to the Government. Our requirement of capital is Rs 20,000 crore for maintaining a capital adequacy of 8 per cent, which is good enough because Basel-III requires only 5 per cent,” he said.

If the Government wants to maintain 59 per cent stake, it may have to infuse capital of Rs 14,000 crore. If it decides to retain only 51 per cent stake, then it will have to bring in about Rs 9,000 crore.

Mr Chaudhuri also indicated that SBI may hike its lending rates by 25-50 basis points next week.

>krsrivats@thehindu.co.in

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