Pranab to provide funds to help SBI

Tabriz (Iran): Expressing the government`s commitment to recapitalisation of State Bank of India (SBI), Finance Minister Pranab Mukherjee today said that funds would be provided to the PSU lender to enable it to achieve compliance with capital adequacy ratio (CAR) norms.

"We are going to infuse fresh capital in SBI so that Tier-1 (equity) capital becomes at least 8 per cent," he told reporters during a stopover here on his way back from Paris to New Delhi. The minister was in the French capital to attend the G-20 meeting of Finance Ministers and Central Bank Governors.

When asked whether the government would provide Rs 12,000 crore, as is being demanded by SBI, Mukherjee said, "This (requirement) is over a period of time and not in one year…I am going to provide additional capital to SBI."

Recapitalisation of banks, the minister said, was a continuing process and the government will continue to provide funds to PSU lenders through the Budget to ensure that they can meet solvency requirements.

As earlier indicated by Financial Services Secretary D K Mittal, the government will inject Rs 3,000-4000 crore into SBI during the current fiscal to help it achieve an 8 per cent capital adequacy ratio (CAR).

Moody`s had recently downgraded the credit rating of SBI, citing inadequate capital and poor asset quality as reasons.

Following the downgrade, major private sector lenders like ICICI Bank, HDFC Bank and Axis Bank now have a better standing than SBI in terms of their credit rating.

Although SBI has been contemplating a rights issue to raise capital, this could not go through because of poor stock market conditions and the reluctance of the government to subscribe to the issue to maintain its equity holding in the PSU lender.

The government holds a 59 per cent stake in the country`s largest bank.

SBI, according to estimates, needs about Rs 20,000 crore of fresh capital to maintain the pace of growth without sacrificing solvency margin norms.