As the more stringent capital requirement norms for banks kick in globally, the nation’s largest lender State Bank has said it will have to mop up a staggering Rs 2.30 trillion in additional capital to meet the stringent guidelines by 2018."We need about Rs 2,30,000 crore of additional capital for Basel III up to 2018. Out of this Rs 1,50,000 crore is of tier I and the rest Rs 80,000 in tier II capital," managing director and chief financial officer Diwakar Gupta quoted.Gupta, who is retiring after nearly four decades at SBI towards the end of the month, further said the requirement is for a five-year period and the bank is comfortable on the capital front at present.
According to the Reserve Bank, the domestic banks will collectively need to raise Rs 5 trillion to implement the Basel-III capital needs, which is the newer international standard of capital allocation devised and adopted following the 2008 financial crisis.The Reserve Bank introduced the Basel III capital regulations for banks effective this April 1. The capital requirements will be phased over a period, up to March 2018—nine months ahead of the Basel Committee phase-in.
According to experts, some of the required money will come through internal accruals, while some part will have to be raised from the market.Gupta said for SBI, it is important to time the capital raising appropriately, as other banks will also be looking to raise capital."When the whole banking industry will need money, we need to time our capital raising accordingly. Therefore, the sooner we go to the market, the better it is," he said.Gupta, however, expressed reservations if this is the right time to do so, citing the highly volatile capital markets.For this fiscal, the bank can collect upwards of Rs 20,000 crore, which will include infusion from the government and through the market as well.Gupta said the government owns a little over 62 per cent in the bank and that there is a scope for getting it down to up to 58 per cent levels for the additional capital raising.
SBI, whose capital adequacy stood at 12.92 per cent as of last fiscal end, had last received an infusion of Rs 7,900 crore from the government last fiscal.
