State Bank rules out capital infusion after ₹15,000 cr QIP
MUMBAI: State Bank of India (SBI) on Friday said that it will not require any capital infusion for the next two years after raising ₹15,000 crore through a qualified institutional placement (QIP), the largest share sale in the secondary market by a bank.
“As per the plan we have put in place, we are quite comfortable on the capital front till next year. We will not require government funds (in FY18). At this point we have not asked for capital (from the government). Even without this capital raise, we can meet all the regulatory capital requirements up to 2019, including Basel III needs,” Arundhati Bhattacharya, chairman of SBI, said.
She added that in the current fiscal the bank will be focusing on listing its life insurance arm. “We have plans of unlocking value by listing at least the life insurance subsidiary. There will be some more (capital) that we (will) get through our non-core divestments.”
SBI had opened the share sale through private placement on 5 June. In a regulatory filing, the bank said its central board decided to close the issue on Thursday and had accorded its consent for the issue of approximately 52.2 crore shares at a price of ₹287.25 for an aggregate value of about ₹15,000 crore.
On Friday, the bank slashed the interest rate on home loans above ₹75 lakh, the first to do so after the Reserve Bank of India’s decision to reduce risk weights. SBI reduced the home loan rate by 10 basis points to 8.55% from 8.65% earlier. The new rates are effective from June 15.
One basis point is one-hundredth of a percentage point. RBI on Wednesday said that the risk weights on loans above Rs75 lakh will be reduced to 50% from 75% previously. This will help banks in saving capital, which can be used for further lending.
Risk weights are used to calculate the minimum capital that must be held by banks to reduce the risk of insolvency.
“Taking a cue from the recent central bank reduction in risk weightage on home loans, SBI is passing on the benefit to its customers by reducing its interest rates on home loans above Rs75 lakh,” said Rajnish Kumar, managing director (national banking) at SBI. Post the QIP, the government’s stake has come down to 57.07% from 62.22% earlier. The capital adequacy ratio of the bank jumped 79 basis points to 13.64%. Under Basel III norms, banks are required to maintain a capital adequacy ratio at a minimum level of 11.50% by March 2019. For the current financial year, banks are required to maintain it at 10.875%.
SBI expects credit growth of 10-12% in the current financial year and 14% in the next. The bank has not fixed a target for selling non-core assets, but is looking to raise funds through the SBI Life initial public offering (IPO) and the National Stock Exchange (NSE) IPO, though it will not completely sell its stake in NSE.