The government is likely to decide on the rights issue proposal of country's largest lender State Bank India (SBI) in the next three months to fund its capital requirement for future business growth.
"We will be taking a call on rights issues or other options through which capital can be infused in SBI within next 2-3 months," official sources said.
The government would also examine other route of capital infusion like follow-on public offer (FPO), Qualified Institutional Placement (QIP), etc, taking into view the second quarter provisional numbers.
The bank requires as much as Rs 30,000 crore capital over the next three years to fund its business growth without bringing down its Tier-I capital below 9%.
As of June 2011, the Capital Adequacy Ratio (CAR) of the bank stood at 11.6%. Of this, Tier-I capital stood at 7.6% at the end of first quarter, against the government's desire of minimum 8%.
Last week, SBI Chairman Pratip Chaudhuri had said, "We are already in a dialogue with the government for the rights issue to bring new Tier-I...It should happen by the end of this fiscal."
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The government is committed to maintaining public sector character of the bank and after the amendment of State Bank of India Act, the percentage of government holding cannot go below 51%, he had said.
"So at various scenario, what would be the requirement of the rights issue, what would be contribution required for the government. The number would be as high as 14,000 crore to Rs 9,000 crore," he had said.
"Rs 14,000 crore if it retains at 59%, Rs 9,000 crore for 51% and Rs 11,000 crore for 55%," he added.
Currently, government owns 59.4% in the bank. If the government wants to retain its holding at the current level, it should subscribe to 59.4% of total rights.
It is to be noted that the country's largest lender had raised over Rs 16,000 crore through a rights issue in 2008. In the last SBI rights issue, the government contribution was in the form of bonds to the bank instead of cash.