SBI to raise Rs 4000 crore Tier-II capital this year

The state Bank of India (SBI) has decided to raise close to Rs 4,000 crore of Tier-II capital this year through a combination of domestic and overseas subordinate debt.

"We have decided to raise close to Rs 4000 crore of subordinate bond, a major portion of which would also be offered to international investors overseas. The fund would be raised to meet Basel-II capital adequacy ratio as well as finance our expansion plans-both foreign and domestic. We expect a robust asset growth in the next couple of years," explained A K Purwar, chairman, SBI while talking to reporters in Kolkata today.

When asked on the quantum of the fund to be raised from overseas market Purwar said, "Theoretically we would like to raise the entire amount from overseas market but there is a dedicated investor base in India and we should offer them a portion of the issue. The issue being discussed now, was the quantum to be provided to the domestic investors."

"It has however been decided that the entire amount will not be raised from the domestic market, a portion will necessarily be from the domestic market," he added.

"The Bank's CAR till March 2005 stood around 13 per cent which is in no way considered efficient at SBI. Traditionally SBI's CAR hovers around 12 per cent, but Basel-II capital requirement and targeted credit growth would require these funds," he explained.

The bank was also considering the possibility of issuing preference shares.

"We have been waiting for preferences share guidelines to be issued by Reserve Bank of India (RBI). Once these are out we would consider the same," he added.

Talking about business growth, Purwar said advances were expected at 23 per cent while deposits growth were expected at 16 per cent.

Purwar also mentioned that the bank was looking at a couple of more acquisitions in Asia and Africa and was in the process of conducting due-diligence in at a few banks.

"We hope to acquire at lest one bank this year. The size of the bank to be acquired would be a mid-sized or a small one but with a strong base and fundamental," he added.

Talking about new lines of business, Purwar said we would also float a pension subsidiary once the guidelines are clear. The pension fund would could also be launched in joint venture with another foreign party.

"The next in line would be SBI's entry into general insurance business," he added.