SBI Adopts FPO as New Fund Raising Tool

SBI Adopts FPO as New Fund Raising ToolThe State Bank of India (SBI) declared that if the government did not subscribe to its rights issue, it would look at private institutional placements and a follow-on public offer (FPO) as their new tools to raise funds.

Chairman, Pratip Chaudhuri commented that by 12 March, the bank had planned to make the mixture of rights issue and other instruments which would be used to raise an amount of Rs 20,000 crore.

He added, “We are in talks with the government for a rights issue of Rs 20,000 crore and if the government does not mind bringing its equity down to 55%, we have options like combination of a rights issue, a follow-on public offer
(FPO) or a private placement with institutional investors”.

Superior stipulation had pulled SBI's net profit by 99%. In the previous financial year, for the legal responsibilities, the bank had to provide nearly Rs 8,000 crore from capital reserves, which resulted in the turn down in the bank's Tier-I capital.

Meanwhile, RBI has asked banks to generate special buffers, making specific provisions for bad loans that would be used during the system-wide downturns. Till now, the bank has created a countercyclical stipulation buffer of Rs 2,330 crore. The shortfall is expected to be met by September.