State Bank of India (SBI) is expecting to raise Rs. 5000 crores through the right issue by March 2012 to acheive 8% capital adequacy ratio. With the deterioration in its asset quality, and Tier I capital coming down below 8%, global ratings agency Moody's downgraded the creditworthiness of SBI by a notch to 'D+' from C- last week.
Tier I capital of the bank declined to 7.6% at the end of first quarter, against the minimum 8% level desired by the government. Over all Capital Adequacy Ratio (CAR) (both Tier I and Tier II) of SBI stood at 11.6% as of June, 2011.
At the same time, SBI's NPAs reached three-year high of 3.52% of loans for the quarter ended June 30. SBI had raised over Rs 16,000 crore through a rights issue in 2008. The government's contribution was in the form of bonds to the bank instead of cash. The bank intends to bring down its net NPA to 1.5% by the end of the current fiscal.
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