SBI Plans Rs 20,000 Crore Capital Mop-up by March 2021, to Seek Shareholders' Nod in July

The country's largest lender SBI on Tuesday said it will seek shareholders' approval in mid-July to raise up to Rs 20,000 crore equity capital through various means in the current fiscal.

"We advise that a general Meeting of the shareholders of State Bank of lndia will be held on Tuesday, the 14th July, 2O2O at the State Bank Auditorium, State Bank Bhavan Complex, Madame Cama Road, Mumbai.

"If the conditions are not conducive and the local authorities do not permit to hold physical general meeting, the meeting will be held through Video Conferencing (VC)/ Other Audio Visual Means (OAVM) facility to transact business," SBI said in a regulatory filing.

The lender said it will seek shareholders' nod in the meeting "to create, offer, issue and allot, such number of equity shares of Re 1 each, for an amount not exceeding Rs 20,000 crore or such amount as approved by government and RBI subject to the condition that the Government of India shareholding in equity share capital of the bank does not fall below 52 per cent at any point of time".

The shares are to be allotted by way of public issue (follow-on-public offer) or private placement, including Qualified Institutional Placement (QIP) /Global Depository Receipt (GDRs) /American Depository Receipt (ADRs) and/or any other mode(s) or a combination(s) thereof, it said.

On the explanation for the capital raise target, the bank said based on the assumptions of growth in Risk Weighted Assets (RWA) and plough back of profits, the bank may require to raise additional capital during FY 2020-21.

"In an environment of heightened uncertainty caused by COVID-19, the RBI is of the view that the banks must conserve capital to retain their capacity to support the economy and to absorb losses.

"Further, the bank requires adequate capital to match the anticipated growth in assets and comply with stipulated level of capital adequacy, especially on account of requirement of the Capital Conservation Buffer (CCB) i.e. additional 0.625 per cent by September 2020, twice deferred by RBI from March 2019 to March 2020 and March 2020 to September 2020," SBI said.

Considering the business growth during the current year as well as that for the years to come, there is a need for higher capital, particularly, tier-I capital targeting the end state capital ratios, at the initial stage, to ensure smooth transition to FY21 capital requirements.

The guidelines on implementation of Basel III capital requirements in India have become effective from April 1, 2013 in a phased manner.

SBI's overall Capital Adequacy Ratio (CAR), as on March 31, 2020, stood at 13.06 per cent, with CET (common equity tier)-I capital at 9.77 per cent.

"The Central Board of the bank has decided that the bank should maintain minimum Capital Adequacy Ratios in line with the RBI Basel III transitional arrangements," it added.

In line with the central government reform agenda for responsive and responsible PSBs, SBI said it the had undertaken reform agenda to optimally raise equity capital during the 2018-19 and 2019-20 amounting to Rs 20,000 crore by issuance of common equity to investors other than the government.

"However, the market conditions were not conducive for raising equity capital from market with lower share price to book value," it said.

The RBI and government approval for raising further equity capital was in place till March 31, 2020 but shareholders' approval for raising equity capital expired on December 6, 2019, which was extended further till March 31, 2021.

In view of the massive outbreak of the COVID-19 pandemic, social distancing is a norm to be followed and the members can attend and participate in the ensuing General Meeting through VC/OAVM, which may not require physical presence of members at a common venue, SBI said.