According to a recent press report the finance ministry said that it was committed to capitalizing State Bank of India. One of the finance ministry officials said that SBI’s capitalization program was independent of the perception of global rating agencies.
According to reports the ministry has said that investors should not be worried with the downgrade as RBI guidelines mandate tier-I capital adequacy ratio at 6% and that SBI’s Tier I CAR stood at 7.60% as of June 30.
The official also said that it was the government’s policy to keep it (CAR) at 8%, so that the bank is strong enough. SBI ended 4% down at Rs 1,715.3, losing almost 8% in two trading sessions. The official also said that the ministry will allocate Rs 3,000 crore to SBI’s core equity capital and he said that the details regarding SBI’s further capitalization is being worked out. The bank’s capitalization can be through a rights issue or any other method according to the official.
Reports said that the finance ministry had allocated Rs. 6,000 crore towards bank capitalization during the current financial year of which half the amount is likely to go to SBI. SBI has said that it would need Rs. 20,000 crore to fund its growth plans over the next two fiscals.
Reports also said that the government will have to contribute up to Rs 12,000 crore in case the bank’s rights issue is approved, the. In 2010-11, the government had infused Rs. 20,157 crore in state-run banks to help them achieve a tier-I capital adequacy ratio at 8%.
The bank’s loan portfolio includes home loan, personal loan, car loans, mortgage loans, gold loan, education loans etc. The bank has also recently withdrawn its teaser loan due to the higher provisioning norms stipulated by the RBI for such advances.