Rise in interest rates expected soon: SBI
By Joseph Samson
May 17, 2010
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The country's largest lender, State Bank of India has indicated that there might be a rise in the interest rates in the upcoming days.

According to Chairman of the bank, Mr O.P. Bhatt, "There continues to be surplus liquidity in the system and credit offtake has not picked up, in fact it has been negative and by the end of June it could be flat. Capital inflows also look good for now, so there is no pressure on liquidity, however, if RBI takes steps to control inflation, liquidity could dry up, and there could be an upward bias in interest rate."

The bank plans to raise capital worth Rs 15,000-20,000 crore via rights issue this fiscal.

"We have adequate capital at present. But we are in talks with the Government for seeking their approval for a rights issue, which would help us maintain the Government's stake at the present level of 59 per cent," Bhatt said.

He added, "Though rights issue will be the preferred route, in case government does not agree for that, then we have the cushion of bringing down government's stake to 55 per cent (59 per cent). There is also a Bill in the Parliament, which will enable us to bring down government's stake further to 51 per cent so we can dilute up to eight per cent and can raise about Rs 20,000 crore."

Other aims of the bank include a retail bond issue of Rs 200 crore which it plans to bring in the first half of the fiscal. According to Bhatt, the bank also wants its life insurance arm, SBI Life to get listed. "We are not in need of capital for the company, but we would like it to be listed, so that there can be some price discovery. We are in touch with IRDA for that."

The bank also plans to expand in areas like Africa where Indian companies do have business but the bank does not have its presence yet, he said.


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