Five associates of State Bank of India (SBI) would raise about Rs 33,000 crore capital to meet global risk norms -- Basel III -- in the next five years.
“It has been estimated that Rs 32,831 crore total capital is required under the Basel III capital adequacy framework for all SBI subsidiary banks between 2014-15 and 2018-19,” a senior SBI official said.
Part of the fund would be raised by the market while remaining would be provided by the parent SBI, the official added. The country’s largest lender has five associate banks -— State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad.
Among these, State Bank of Bikaner and Jaipur, SBM and State Bank of Travancore are listed entities. Two of the subsidiaries have already taken board approval for raising funds through rights issue.
State Bank of Mysore (SBM) plans to raise Rs 425 crore through a rights issue as it has received in-principle approval from the board. SBI holds 90 per cent stake in the bank, while the balance 10 per cent is with the public. Similarly, board of State Bank of Travancore has also approved the rights issue of the bank for up to Rs 485 crore. SBI holds 79 per cent stake in the bank.
In order to maintain existing shareholding, SBI would have to subscribe rights issue proportionately.
However, in case of preferential allotment, the fund would flow from the parent. The unlisted subsidiaries like State Bank of Patiala and State Bank of Hyderabad would get funds from the parent entity. Besides, additional capital would be required needed for merger of associates banks.
“It is a question of scalability and viability. Additional capital would be needed in that case and so we have to see when the merger happens whether that much of funds is available that time,” SBI MD and group executive (national banking) B Sriram had said last month.SBI first merged its associate State Bank of Saurashtra with itself in 2008. Two years later in 2010, State Bank of Indore was merged with SBI.