State Bank of India (SBI), the country's top lender, will issue shares to the government at Rs 2,191.69 a piece to raise about Rs 7,900 crore, the state-run lender said on Thursday.
SBI shares closed up 0.2% at Rs 2,260 ahead of the news.
The government is injecting funds into SBI by subscribing to its shares as part of a move to shore up the capital base of state-run banks eroded by fast growth and worsening asset quality.
SBI, which holds about a quarter of the country's loans and deposits, was downgraded by Moody's Investors Service in October last year because of its thin capital base and worsening asset quality.