SBI to raise up to $2 bn through overseas bond sale

RBI will be holding mid-quarterly review of the monetary policy on Monday amid expectations of rate cuts.

Written by Agencies | Mumbai | Published: June 17, 2012 6:00:22 pm

Country’s largest lender State Bank of India will raise up to USD 2 billion through an overseas bond sale in the next three months,a top official has said.

“We will be raising USD 1-2 billion within the next three months,” SBI Chairman Pratip Chaudhuri told reporters over the weekend.

He said although the bank is yet to decide on the exact size of the issue,it will not go for a smaller issue size,saying it does not help a bank of its size.

The fund infusion will help the bank augment its tier-II capital adequacy. Its total capital adequacy had stood at 13.9 per cent in March 2012,with the core tier-I constituting for over 9 per cent.

The bank,which was downgraded by the rating agency Moody’s last year over fears of asset quality and lower capital adequacy ratio,has not decided the exact geography to raise the money.

But,Chaudhuri sounded confident that it will not have trouble getting the commitments even in the present times which are filled with signs of gloom.

He said the bank has written to Moody’s recently to reconsider and upgrade its rating following the infusion of Rs 8,000 crore capital from the government late last fiscal and a “war against non performing assets” which it is winning.

“We were not in a position to apply for a reversal of the action as our last quarter results were yet to come out and we did not have any numbers to show. Once the results were out,we have written to them,” Chaudhuri explained,stating that it will take some time for the rating agency to take action.

At its earnings conference in mid-May,Chaudhuri had declared that it has the upper-hand over non-performing assets which had dented its bottomlines in the preceding quarters and will continue to focus on the aspect going ahead.

On possible margin pressures in these uncertain times,Chaudhuri said,”We had given a target of 3.75 per cent for the fiscal and our performance of the first two months (of the financial year) shows that we have exceeded the number.”

On the impact of reduction in interest rates of up to 3.50 per cent it had announced last week,Chaudhuri said it will shave off up to 0.10 per cent from net interest margin,but added that such a cut in certain segments like SME loans was necessary as the bank had high rates.

Chaudhuri reiterated his demand for 1 per cent reduction in the cash reserve ratio — the amount of cash banks need to park with the Reserve Bank.

RBI will be holding mid-quarterly review of the monetary policy on Monday amid expectations of rate cuts.

Such a reduction will release Rs 800 crore in capital for the bank while a commensurate (1 per cent) reduction in the overnight lending rate or the repo will save it only a fifth of the amount.

Hence,from the transmission of monetary policy perspective,a cut in the CRR would be beneficial,Chaudhuri said,adding that a cut in repo rate is merely “indicative” of the intentions of RBI but does not have much impact on the actual lending rates in the system.

Chaudhuri refrained from answering a question on whether the bank will cut its interest rates by an equal measure in case RBI cuts CRR as desired.

SBI is the minority list of banks which have not cut the base rate following RBI’s surprise move to cut policy rate by 0.50 per cent at its annual policy review in April.

Even though RBI had clearly articulated difficulty in cutting rates further in the April policy statement,a large section of the market believes that the central bank will go for another round of rate cut to spur growth following the dismal growth figures reported recently.

Official data released late last month showed growth falling to a nine-year low at 5.3 per cent for the March quarter. For the entire fiscal,GDP was 6.5 per cent,lower than the 6.7 per cent clocked during the peak of global financial crisis.

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