State Bank of India will hold discussion with the Finance Ministry next week on the much-delayed rights issues plan of the bank, its chairman Pratip Chaudhuri said on Saturday.
"We will have a consultation with the Finance Ministry officials next week on the rights issue because they have to give their share in the rights issue," Mr Chaudhuri told reporters on the sidelines of the two-day annual banking summit Bancon 2012 here.
The chairman, however, did not detail the size of the issue. Last year, it was planning to launch an over Rs 20,000 crore issue.
State Bank has been waiting for a go-ahead from the government, which owns 58.7 per cent in the bank, for an over Rs 20,000 crore rights issue since the middle of FY11. The process was started during the term of the past chairman O P Bhatt.
The government has been delaying the rights issue as its own finances have been constrained for too long now as fiscal deficit had hit a 5.8 per cent of GDP last fiscal.
While denying permission to launch a rights issue last year, the government had infused over Rs 7,800 crore into the bank.
Last week, the Finance Ministry had said that it may allow its banks to raise funds through qualified institutional placement.
Banks need capital to maintain their solvency ratio apart from driving business and SBI's core capital has been dipping driven down by rising bad loans and the resultant provisions.
At the end of the September quarter, SBI had capital adequacy ratio of 12.63 per cent with tier-I capital at 8.97 per cent. The RBI mandated requirement is 8 per cent.
"If we include the profits, the tier-I capital will go above 10 per cent by the end of this fiscal and above 11 per cent if the government infuses some funds," Mr Chaudhuri had said on the earnings day.
Despite reporting a robust 30 per cent rise in net profit to Rs 3,658 crore in the September quarter as it set aside lower amount for provisions, though its bad assets soared to 5.15 per cent of its gross advances and 2.44 per cent to net advances.
In absolute terms, the gross non-performing assets rose to Rs 49,202.46 crore, while net NPA rose to Rs 22,614 crore. The net NPA addition stood at Rs 13,200 crore against Rs 11,400 crore a year ago.
But the bank made 37 per cent less provisions for NAPs at Rs 1,837 crore compared to Rs 2,921 crore reported in the same period last fiscal, as the bank has made higher provisions in the previous quarter.
The move comes in the wake of the fiscal deficit being pegged at 5.3 per cent, marginally up from the budgeted 5.1 per cent and the subsequent measures to trim expenditure.
However, Mr Chaudhuri said the bank prefers a rights issue over the QIP issue as it will dilute the government stake.
Earlier in the day, inaugurating the BANCON, the Finance Minister P Chidambaram said at any cost the government will not bring down its stake in banks below 51 per cent.
On the capital infusion by the Centre this fiscal, Mr Chaudhuri said he is confident of getting at least Rs 4,000 crore this year.
The Finance Minister had last week said, there is a budgetary provision for only Rs 15,000 crore for capital infusion of its 23 bank this fiscal and three banks—Central Bank of India, Indian Overseas Bank and Bank of Maharashtra would need the maximum funds this year.
To the Finance Minister's call to create large banks, which could rival the global leaders today, Mr Chaudhuri said, "the economic advantage of bank consolidation is very strong and we have already done an assessment plan. So we are examining the possibility. But unless we are very strong we will not go ahead with the plan.
SBI has five subsidiary banks -- State Banks of Travancore, Mysore, Hyderabad, Jaipur & Bikaner and Patiala.
Over the past four years, it had merged two. On the base rate cut, the chairman said, the asset liability committee or Alco will meet in the first week of next month to take a call on lending rate/base rate cuts.
The Alco in its last meeting had decided against lowering the base rate.