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Friday, October 31, 2014  

India to pump $558m into SBI to boost operations
NEW DELHI State Bank of India (SBI), the country’s top lender, said on Saturday that its board had approved a capital injection of Rs30.04 billion ($558 million) by the government through preferential allotment of shares in the current fiscal year.

The funds will be used to support local and international banking operations, and the bank is seeking separate approvals from the government and India’s central bank to raise its issued capital, SBI said in a statement.

“The central board of the bank in its meeting has approved infusion of capital funds in the bank by the government of India to the tune of Rs30.04 billion during 2012-13,” it said.

The proposal is subject to necessary regulatory approvals, it said. Last fiscal, the government had infused Rs79 billion in SBI to increase the tier-I capital of the bank.

Following the capital infusion in March 2012, the government holding in SBI rose to 61.58 per cent from 59.4 per cent.

The government approved infusion of Rs125.17 billion in around 10 state-owned banks by March.

Last fiscal, the government pumped in about Rs120 billion additional in public sector banks as against Rs201.17 billion in the previous year.

The country’s central bank will complete the transfer before March.

India’s state-run banks, which account for three-fourths of the country’s banking assets, have seen capital buffers shrink as they spend more to hedge against soured debt amid the slowest economic growth in a decade. The infusion will help banks meet tighter Basel III capital rules to be phased in beginning this year. “Unlike the usual practice of infusing money at the end of the fiscal year, this time the government is doing it early to demonstrate their commitment,” Vishal Narnolia, a Mumbai-based banking analyst at SMC Global Securities said. “It is a credit positive.”

The government in March of last year said it planned to infuse Rs158.9 billion into state-controlled lenders in the year ending-March 2013. India is among 11 of the 27 member countries of the Basel Committee of Banking Supervision that have finalised regulations to meet the Basel III requirements, the central bank said.

SBI will sell part of its Rs492 billion ($8.9 billion) of soured debt to boost asset quality and profit amid the slowest economic growth in a decade.

The government-controlled bank is working on the sale or recovery of 37 per cent, or Rs180 billion, of its bad loans, Soundara Kumar, who heads the bank’s stressed assets management division in Mumbai, said.

“For the first time in recent years we are looking at selling non-performing loans,” she said. “We’ve been trying to recover all these loans on our own so far, with some success.”

The 207-year-old lender is seeking to boost net income as Indian banks’ bad-loan ratio jumped the most in at least five years in the 12 months ended September 30. Indian steelmakers, textile producers and trading companies are struggling to repay debt as the highest interest rates among the major emerging economies in Asia and a weakening rupee erode their earnings, according to Kumar.

Agencies
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