Thaindian News

Bangalore, June 8 (IANS) The government has consented to the proposed rights issue of the State Bank of India (SBI) for raising about Rs.20,000 crore ($4.4 billion) by December, a top bank official said Wednesday.

“We have the support of the government for our rights issue plan to raise about Rs.20,000 crore by this December. We are in talks with the (finance) ministry on the share of its contribution to the issue as the majority shareholder,” SBI chairman Pratip Chaudhuri told reporters here.

As the largest shareholder of the country’s biggest state-run bank, the government holds 59.4 percent equity in the SBI.

In proportion to its majority stake, the government’s contribution to the issue is estimated to be Rs.12,000 crore.

“The government has been very supportive of the bank, which is considered as its flagship bank. The modalities of the proposed issue will be finalised soon,” Chaudhuri said on the margins of a function here.

In the backdrop of the bank’s net profit plunging 99 percent year-on-year during the last quarter (January-March) of fiscal 2010-11 due to higher provisioning and taxes, the chairman hoped for a turn around in the earnings for the first quarter (April-June) of fiscal 2011-12.

“Our net profit for the previous quarter (Q4 of FY 2011) took a hit due to huge provisioning for staff pension than for losses against bad loans,” Chaudhuri said.

With an increase in lending rates after the central bank (Reserve Bank of India) hiked the base rate by 50 basis points (0.5 percent) on repurchase (repo) and reverse repo May 3, the bank is expecting its net margins to improve this quarter from 3.07 percent posted in the previous quarter.

Chaudhuri was in the city to attend the 2010-11 annual general meeting of State Bank of Mysore (SBM), an associate bank of the SBI, and donate an ambulance to the Rajiv Gandhi Institute of Chest Diseases on behalf of SBM.