Thaindian News

Mumbai, Oct 5 (IANS) State Bank of India (SBI), the country’s largest lender, slumped over four percent Wednesday, sliding for the second straight day after Moody’s downgraded its ratings due to concern over capital and weakening asset quality.

Global ratings agency Moody’s Investor Service Tuesday downgraded State Bank of India’s “financial strength rating” to D+ from C- citing the low capital adequacy and the bank’s recent failure to raise capital and deteriorating asset quality. The agency has also cut the bank’s hybrid debt rating to Ba3 from Ba2.

The ratings downgrade will make the bank’s overseas borrowings costlier.

Share price of SBI tumbled 4.21 percent to Rs.1,711.50 at the Bombay Stock Exchange Wednesday, after slumping 4.1 percent the previous day. The scrip slumped to a low of Rs.1,708.55 in the intra-day.

SBI Chairman Pratip Chaudhuri said the bank had taken note of the ratings downgrade and would complete recapitalisation process by the end of the current financial year.

“It is a reminder to the bank and all the shareholders that recapitalisation measures of SBI acquire greater urgency,” Chaudhuri told reporters here.

State Bank of India, majority owned by the central government, plans to raise nearly Rs.20,000 crore through rights issue to fund its expansion plans.

Chaudhuri said the process of recapitalisaion was likely to be completed by December 2011 or at the most March 2012.

Under the rights issue, shares are issued by a company only to its existing shareholders, generally in the proportion of their current shareholdings.

Currently, the government controls 59.4 percent stake in SBI. In case of rights issue the government would need to subscribe to 59.4 percent of the total rights being issued.

Chaudhuri said SBI’s capital adequacy will improve significantly after the rights issue and may rise to 9 percent. SBI’s Tier-1 capital ratio was 7.60 percent in June this year. For the public sector banks 8 percent Tier-1 capital ratio is desirable.