State Bank of India received approval of the government to make a public issue of fresh equity shares. The issue will lead to dilution of government's stake to 51 per cent from 59.4 per cent, which is at present. With the help of issue, SBI can raise more than Rs 17,000 crore at its present share price of Rs 1,708.
A senior government official said that SBI approached the finance ministry in order to receive approval for raising funds to support its business growth. The bank has enough capital adequacy ratio (CAR) at 12.97 per cent under Basel I norm
The bank's deposits are expected to rise at more than 20 per cent in the existing financial year and consequently its CAR will fall to approximately 10 per cent. However, as per the finance ministry's prudence norms, the entire bank should maintain a CAR of 12 per cent. To maintain the same, SBI has to raise funds from the market.
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