SBI plans Rs 20K-cr rights issues in FY10-11

The country's largest lender State Bank of India on Wednesday said it is planning to mop up Rs 20,000 crore (Rs 200 billion) through a rights issue along with another Rs 200 crore (Rs 2 billion) from bonds this fiscal to fund business growth.

"We are expecting to raise Rs 20,000 crore from a rights issue," chairman OP Bhatt told reporters on the sidelines of a CII event in New Delhi.

The chairman said the issue may come up by this fiscal end since the bank is currently talking to the government about it. "It is still at the conversation stage (with the government). That is why if at all it comes up, it would be towards the end of this fiscal," Bhatt said.

The government holds about 59 per cent stake in SBI and the rights issue is subscribed by the existing shareholders.

"We would like them to put about 60 per cent (in the rights issue)," Bhatt said.

Talking about the bond issue to retail investors, Bhatt said, the bank plans to raise around Rs 200 crore in the first half of this fiscal. The money would be raised from the domestic market and bonds would be offered to retail investors. Usually bonds are offered to institutional investors because of large ticket size.

On the liquidity condition in the system, Bhatt said it is "fairly tight" and likely to continue so in June because of the large outgo on the account of advance tax payments and payment towards broadband wireless access and 3G spectrum.

"Now with liquidity already tight at this point of time and these two major events takes place in June. So, in June it would continue to be tight. July onwards may be some of these money gets recycled and also you have the monetary policy review, then we will see what is the response of the system," he said.

Without giving clear indication on whether banks could increase rates post-July, the SBI chief said, "there is already an upward bias on the interest rate. If liquidity is tight there will obviously be an upward bias on interest rates too."

Bhatt also said liquidity is tight as economic activities are picking up. So, the credit demand is also going to pick up. "So the (upward) bias is definitely there," he added.

On the back of increased economic activity and good monsoon the bank is expecting a credit growth of 20-22 per cent this financial year.