State Bank of India, the country's largest lender, plans to raise $5 billion via overseas debt in the current fiscal year, its chairman said on Friday, if demand for loans pick up in the growing economy.

Pratip Chaudhuri told reporters the bank, which along with its associates controls about a quarter of all Indian bank loans and deposits, aimed to raise the funds through medium-term notes, possibly in the second and third fiscal quarter.

"Right now we have a total objective of $5 billion but we would like to time the market," he said. "First there has to be visibility of credit growth. If there is demand for assets we will go and raise the money."

Chaudhuri, who took up his role earlier this year, had told Reuters in May he expected surging interest rates to crimp loan growth this year to 17-19 per cent, from a January target of 20-22 per cent.

He had said at that time the bank would raise $3 billion to $4 billion in offshore debt in FY12.

State Bank had posted an unexpected plunge in its net profit for the fourth-quarter of the last fiscal year, slammed by higher provisions, operating costs and taxes.

The bank has guided for net interest margins of 3.5 per cent for the current fiscal year that ends next March, and Chaudhuri said the bank was "on track" to achieve it.

State Bank would launch its planned rights share issue in the second or third quarter of this fiscal year, he said.

He said the bank had no plans to raise funds via Tier II bonds.

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