The government is expected to infuse capital into the State Bank of India, India's top lender, through a rights issue to be completed by March 2012, chairman Pratip Chaudhuri said on Wednesday, a day after credit ratings agency Moody's downgraded the bank by a notch.
The bank is expecting a capital infusion of Rs 14,000-21,000 crore, spread over 5 years.
"We have taken note of this message (downgrade by Moody's) and recapitalisation, we are hopeful, will be completed by the end of December 2011 and at the most, if it is stretched, it will go to March," said Chaudhuri. "By that time we would also have our surpluses earned during the year (and) if compensated and supplemented by the rights issue, would put the total Tier 1 level of the bank at 9% of the risk weighted assets."
As of June 30, SBI's Tier 1 capital stood at 7.6%, which is below the mandatory level of 8%. Tier 1 capital mainly refers to equity.
Chaudhuri clarified that the downgrade applies only to $625 million of perpetual debt raised in 2007 for 10 years. "Our overall rating remains at Baa2 which is higher than the sovereign rating of India Baa3," he said.