State Bank of India, which has the lowest tier-1 equity among big banks, faces a 'crisis' next fiscal, if the government doesn't invest in a rights share sale, essential to keep lending, said a bank executive.
The bank could go for bonds sale to raise its capital adequacy in tier-2 capital to continue lending, but it may turn out to be expensive with interest rates remaining high.
"We can't sustain without capital infusion from the government in long term," CFO Diwakar Gupta told reporters on the sidelines of a conference. "So, it's a crisis situation, if we don't get capital. But we have a plan B to sustain it this year. We will be able to manage in FY12."
SBI planned to raise more than Rs 20,000 crore in a rights share sale this year. But weak government finances may force it to scrap the plan. The government, which has no resources to buy in a rights share sale, doesn't want to lessen its stake from 59%. But its chairman Pratip Chaudhuri is hopeful that the government could still manage to buy shares in a rights issue.
"The government is very positive and actively considering it and the rights issue will come in this fiscal," Chaudhuri told reporters at the same conference. "We are in the second quarter, (it may come) maybe in the third or fourth quarter."
For the first time in a decade, the bank's tier-I capital has dipped below 8%, though the overall capital adequacy ratio is around 11.6%. The RBI's norms stipulate that banks have to set aside 9% of the risk weighted capital as a prudential capital. However, banks themselves maintain a capital adequacy of 12%. Of this, 8 percentage point is in tier-I capital comprising equity and reserves. While the balance 4% is maintained in debt instruments. But the tight equity positions may not be as harmful to nationalised banks or SBI as they were a few years ago.
"Injection of common equity by the government into state-owned banks in 2010 has helped most banks raise core tier-1 capital ratios to above 8%," said Fitch Ratings. "A notable exception is SBI, which is awaiting equity injection by end-2011 or early-2012. The slight rise in state shareholding to 58% has also increased these banks' flexibility to tap the equity capital market, a notable difference to 2008 when shareholding in some banks was down to the statutory minimum of 51%."
'No Plan for Teaser Loans'
The State Bank of India, country's largest bank, has said that it has no plans to revive teaser rates although its rival and second-largest lender ICICI Bank introduced a dual-rate home loan plan last week.
+1.jpg)
0 comments
Post a Comment