State Bank of India will issue equity shares to the Union government on a preferential basis at Rs 2,191.69 a share.
This includes a premium of Rs 2,181.69 on a share with a face value of Rs 10 each.
The executive committee of the central board fixed the issue price on Thursday, SBI informed the Bombay Stock Exchange.
The government is infusing about Rs 7,900 crore (Rs 79 billion) in the country's largest lender to shore up its Tier-I capital base and support business growth.
SBI shares closed flat at Rs 2,261.25 per share on the Bombay Stock Exchange on Thursday.
As of December 31, the government's shareholding in SBI stood at 59.40 per cent.
The bank's Tier-I capital adequacy ratio was 7.59 per cent as of December 31, below the floor of eight per cent set by the government for public sector banks.
SBI has estimated Tier-I CAR in the end of March at 9.01 per cent, including retained profits and the government's capital infusion.
The bank is scheduled to hold a shareholders' meeting on March 19 to secure consent for the issuance of shares on a preferential basis.