SBI needs up to Rs 10K cr from govt this year: Chaudhuri

Says downgrade a reminder to the government to urgently capitalise the bank

A day after Moodys downgraded its standalone rating due to rising bad loans and a weak capital ratio,State Bank of India (SBI) on Wednesday said it hopes to receive an injection of up to Rs 10,000 crore from the government this fiscal year to increase its capital adequacy ratio to the required level.

SBI chairman Pratip Chaudhuri said the bank has given the government different scenarios of fund requirement ranging from Rs 14,000 crore to Rs 21,000 crore over a five-year period. But for this fiscal,the bank needs anything between Rs 3,000-10,000 crore. We have asked for this depending on the level of capitalisation at 8 per cent and 9 per cent and what the government holding would be. For 9 per cent tier I capital,if we project 15 per cent credit growth,the amount required from the government will be Rs 10,000 crore, he said adding the rest could be taken care of by the surpluses earned during this year.

Downplaying the impact of the downgrade by Moodys,the SBI chairman said the downgrade applies only to $625 million perpetual debt raised in two tranches in 2007 for 10 years. The instrument is obsolete now as Basel III does not consider it to be part of Tier I capital. We dont have any plan to reissue such instruments, he said.

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However,the SBI chairmans explanation on the downgrade failed to make any impact in the market with the SBI shares falling another 4 per cent to Rs 1,715.30 on Wednesday. The stock had fallen 4 per cent on Tuesday after the Moodys announcement.

He said it is a reminder to the government to urgently capitalise it,but he also admitted that the action will marginally increase medium term borrowing costs. If you want to put a number to that (escalation in cost of fund raising) and if you do a detailed calculation,it would be two basis points, Chaudhuri said on the impact on the downgrade on the banks fund raising plans.

Moodys retains C- rating for ICICI Bank

Moodys has re-affirmed its rating for ICICI Bank and said the private sector lender continues to maintain a robust franchise and a strong liquidity,capitalisation and earnings profile. Moodys believes that the probability of systemic support for ICICI Bank is high,given its sizeable retail deposit franchise as well as its importance to the national payment system as the second-largest commercial bank, the ratings agency said.