SBI to securitise 25-30% assets

The State Bank of India (SBI), the country's largest bank, plans to securitise 25-30 per cent of its Rs 2,48,000 crore loan assets over the next few years as an alternative source of funds.

SBI, which has a share of 26.3 per cent of the total deposits and 24.6 per cent of loans, needs to do this to raise capital through a follow-on offer of the equity shares.

"SBI never had capital adequacy problems, but now with two consecutive years of robust credit growth, there is definitely a need for capital," said A K Purwar, chairman, SBI.

He was attending the Asian Corporate Conference organised by Asia Society and Confederation of Indian Industry.

The Reserve Bank of India (RBI) owns 59.73 per cent stake in SBI and as per the law it has to maintain a minimum of 55 per cent stake.

SBI is considering alternatives to deposits as source of funds, which till now have been used for funding credit demand. Deposit growth at below 20 per cent is lagging credit growth of about 28-29 per cent.

The bank is working out details of its fund raising plans and it expects the efforts to gain momentum after June 2006, Purwar said.

Securitisation is a process by which banks sell loan assets to a special purpose vehicle (SPV) in return for an immediate cash payment. The SPV then sells the security interests representing claims on incoming cash flows from the pool of assets by issuing tradable debt securities.

The other funding sources used by SBI are the refinance windows with SIDBI for small and medium enterprise advances, NABARD for the rural and farm sector loans and National Housing Bank for home loans. SBI availed of Rs 6,000 crore of the refinance facility in 2005-06, Purwar said.