SBI plans Rs 4,000 crore issue

Vaidya said the method of raising funds from the capital market was yet to be worked out. According to bank chairman, it could be either through public issues, ADR/GDR or rights issues. The final view would be taken after finalisation of accounts for 1999-2000. The rights issue, however, would depend upon the willingness of the Reserve Bank to subscribe to the issue.

He further added that SBI would formally approach RBI next month to ascertain the central bank’s response to the public issue proposal. In caseRBI, which holds 59.74 per cent stake in the bank did not favour enhancing its participation through the rights issue, the SBI would have to go in for a public issue. Vaidya added that the bank would approach government for necessary approvals.

Justifying the urgency for a fresh infusion of funds, he said that expansion of equity base was necessary for maintaining the CAR at above 12 per cent in view the increase in business volume.

In case the RBI refused to subscribe the rights issues, the government would be needing to amend the SBI Act to facilitate the public issue. As per the Act, the Reserve Bank is required to maintain its stake at 55 per cent in the SBI. The fresh issue without RBI participation could bring down the RBI stake at 40% and thus transform SBI into a private sector bank.

Banking secretary Devi Dayal, it might be recalled, had indicated that the government was prepared to amend the provisions of the SBI Act and a bill might be introduced in this regard in the Winter Session ofParliament.

Apart from RBI’s mandatory stake of 55%, the SBI Act also stipulates a cap of 20 per cent on foreign equity. The SBI chairman had had favoured a cap of 30 per cent instead of 20 per cent currently. The changes in the Act would also be necessary for prompting the SBI to go in for ADR/GDR issue.

Referring to other activities in the bank, Vaidya said if required the SBI was also contemplating voluntary retirement scheme to the employees to cut the staff cost and shed excess fat.

The bank, Vaidya said, would also be appointing global advisor for the proposed entry in the insurance sector. The government, it may be mentioned, has introduced the Insurance Regulatory and Development Authority (IRDA) bill in the Lok Sabha to pave the way for entry of private sector in the insurance business. SBI has eight banking subsidiaries and eight non-banking subsidiaries and by complying with the US GAAP, the bank would bring all the accounts into one balance sheet, Vaidya said.