Adding to the woes of the real estate sector which is already reeling under credit crunch, SBI said that the bank would maintain a cautious approach towards sectors like real estate and would focus on retail and small and medium enterprises.
“It is a no to new real estate projects,” chairman O.P. Bhatt said. “We have our existing customers and if they need additional help or restructuring, we will help.” The public-sector bank could also lower deposit and lending rates by 25 basis points in the next six months.
Rights issue In This FY
In conjunction with this, The State Bank of India also announced its plans to raise Rs 20,000 crore through rights issue in the current financial year to finance its expansion, SBI Chairman O P Bhatt, told reporters. This is not the first time from the state’s largest lender, it had earlier raised Rs 16,376 crore through a rights issue in March 2008, in which the government had contributed over Rs 10,000 crore to subscribe to its share.
This comes close to the heels of a Bill to amend the SBI Act, pending in Parliament, which proposes to lower the floor on government shareholding in the country’s largest bank to 51% from 55%. Once this is approved, it will provide SBI with more headroom to raise capital through issue of equity shares
Its proposal to raise Tier-I capital is in view of the estimated fund requirement of Rs 60,000 crore to Rs 70,000 crore over the next five years. Internal accruals are expected to contribute around Rs 6,000 crore every year to this fund requirement.
Bhatt added that SBI would prefer to raise the proposed funds through a rights issue, in which the government makes its contribution in cash instead of bonds. This means that the government will have to contribute Rs 12,000 crore towards the fund. Though the bank would prefer raising the additional Tier I capital during the current financial year, the timing would depend on the market conditions.
During the last financial year, the bank’s loan book had grown by more than 25% and its deposits had risen by over 30%. In this financial year, SBI would look at growing its loan portfolio by over 25%.