SBIs action to raise the fund through rights issue

By | September 25, 2011

A recent press report State bank of India, the country’s largest commercial bank is looking at the rights issue for capital infusion. The central government is holding 59.4 per cent of major shares of SBI. Government has an influencing authority to frame the fund raising route. It has decided to infuse the capital through preferential route allotment which implies that it does not raise the funds through other share holders.

Government is ready to infuse more funds into SBI than what would have been the case in the rights issue. Finance ministry and SBI Management were in discussion about the rights offering. Moody’s estimation downgraded the value of SBI, owing to the lower capital adequacy ratio and weakening asset quality which made a negative impact on the stock market performance.

In 2008, SBI had raised over Rs.16, 000 crore during rights issue where government contributed through bonds instead of cash. But now, central government has planned to insist the funds to SBI through cash and not through marketable securities bond.

The total budget allocation for this fiscal year is Rs.6000 crore for capital infusion in banks. The total capital requirement for the six state owned banks including SBI is estimated by central of about Rs.20, 000 crore this fiscal. The county’s largest lender offers home loan, personal loan, auto loan, agriculture loan etc.

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About Pradeep Yuvaraj

Pradeep Yuvaraj is a Co-Founder and Director at Finerva Financial Solutions Private Limited, a financial education company focused on personal finance education. He has penned over 250 articles relating to Personal Finance and clocked over 500 hours of educating individuals on managing personal finance. He is a serial entrepreneur and has been associated with 7 Start-ups. His entrepreneurial experience spans industries as varied as Education, Gas Engineering, Automobile Design, Software development and more recently a Pure play presentation design company. Prior to turning entrepreneur in 2005, he has worked for 3 of the top ten companies of the world - Shell, ExxonMobil and Total SA. This experience included handling Branch Operations, Channel Sales and Business Development across 5 states over a period of 8 years. He holds an MBA from Symbiosis and an Electronics Engineering Degree from the University of Pune.

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