SBI props up its capital adequacy to more than 14.50% with the largest ever QIP of Indian market

Last Updated on July 14, 2017 by Bharat Saini

Capital adequacy ratio of State Bank of India (SBI) was 12.85% as on 31 March, 2017. It was well above the minimum capital to risk-weighted assets ratio (CRAR) of 9% that commercial banks in India are required to maintain on an on-going basis, in accordance with the Reserve Bank of India guidelines, based on the Basel III reforms on capital regulation to the extent applicable to banks operating in India, effective from April 1, 2013.

The government which owns more than half of all the state-owned banks plans to invest Rs 70000 crore in capital of these banks till fiscal 2019.This fiscal it intends to invest Rs. 10000 crore whereas rough estimates suggest that banks may need a minimum capital of Rs 30000 crore. State-run lenders are as such keen to raise capital after a surge in stressed loans in the past few years eroded their capital.

Last year, SBI had received Rs 7575 crore from the government as part of its capital infusion plan. As on March 31, the Government of India held 62.22% stake in the bank.

SBI to further strengthen its capital base to increase loan growth as well as cushion the balance sheet from bad loans, has raised Rs 15,000 crore from domestic and foreign institutional investors through qualified institutional placement (QIP) of shares that was launched on Monday the 5^th of June, 2017 and closed in the morning of Tuesday the 6^th of June, 2017 as it reportedly was fully committed prior to the launch. This QIP is believed to have received demand in excess of Rs 20,000 crore of which LIC reportedly bade for about 50 per cent of the offering. The floor price of the share sale was fixed at Rs 287.58 apiece for a face value of Rs 1 each. This share sale by SBI, the country’s biggest lender, is the largest QIP to hit Indian markets, surpassing SBI’s Rs 8,000-crore issue in January 2014. Coal India Ltd’s Rs 15200 crore new shares sale in 2010 is the largest ever equity fund raised in India.

This QIP will boost SBI’s capital adequacy to more than 14.50% and ensure that SBI won’t need more capital for next two years.

SBI Chairman Smt. Arundhati Bhattacharya tweeted on Tuesday June 6, 2017 as under:

• SBI now among top 50 global banks in Assets & Tier I after merger.
• Globally 2^nd largest in terms of physical reach.
• 4 times larger than next competitor in Indian banking segment
• SBI online is the world’s 5^th most visited bank site.