State Bank of India (SBI) plans to raise about Rs 500 crore from retail investors as Tier II capital. This capital will be a part of the Rs 5,000 crore, which the bank plans to raise in January.

According to the SBI Chairman, O P Bhatt, the bank is now giving this opportunity to the common man as earlier it was raising Tier II capital only through big investors.

He said, “The minimum investment required will be anywhere between Rs 10,000 and Rs 1 lakh. We are planning to do this in the current quarter.”

The Tier II capital is raised by issue of bonds with maturity between 2 years and over 15 years. However Bhatt did not say anything about the period of maturity of the bonds and about the interest that SBI shall offer.

Mentioning about the bank’s examination to raise Tier I capital after March, Bhatt said, “If we do not raise Tier I capital in 2009-10, we will have to raise it in the year after that.” He also admitted that SBI’s net interest margins for the quarter ending December are under pressure.

He further said, “Prime lending rate (PLR) has come down and interest rates on deposits haven’t come down as much. In order to take care of this pressure on margins we will have to raise more current and savings account deposits (CASA). For some time now, SBI has been getting Rs 1,000 crore a day in deposits; I would bet that the share of deposits as a mode of investment will not come down.”

He mentioned that the SBI life Insurance may be listed in the next 18 months but there is no immediate plan to merge the remaining SBI subsidiaries.

The government had approved the merger of SBI with State Bank of Saurashtra in July 2008.

Bhatt said that sectors such as export, gem and jewellery, textile, handicrafts, logistics, commercial vehicles etc are under stress.

He stated, “Some of this might translate into the December quarter. However, our loan officers are examining the accounts on a case by case basis.”

Mentioning that 25,000 new employees shall join the bank from January 5, he said, “We will continue to be as aggressive in our branch opening as we have been in the recent past.”