Mumbai: State Bank of India, the country''s largest lender, plans to raise Rs10,000 crore ($2.5 billion) by December to consolidate its operations.

"We plan to raise Rs10,000 crore by December and we are evaluating various options of fund-raising," SBI chairman O P Bhatt said on the sidelines of a banking conference.
Bhatt said the bank has not decided the exact size or the timing of the issue, or whether shares would be offered in the domestic or foreign markets.

Bhatt had earlier said SBI might need up to Rs50,000 crore in the next few years to expand and invest in ventures including insurance, private equity and wealth management.

SBI will kick off the process of consolidation with the merger of State Bank of Saurashtra. "We will see how this goes before embarking upon further consolidation (with its other associate banks)," Bhatt said, adding, "We want to learn from this process and then go in for further consolidation."

However, no timeframe has been set for consolidation with the other associate banks of SBI, he said.

Bhatt said there had been a fall in credit demand but this month has seen a pick-up. "We are aiming for a 25 per cent growth in credit," he said.

He said the risk of non-performing assets, challenges of the knowledge economy and need for scale in the banking sector are issues needing immediate attention as the country moves to a higher growth trajectory.

"With an average GDP of 7.5 per cent for the last five years, India is moving to a higher growth trajectory... The question nagging my mind is... Is the growth sustainable?" Bhatt said presenting the theme for FICCI conference on ''Global Banking''.

"With credit growth galloping at 30 per cent, the NPAs, both gross and net, are coming down, but are they coming down in absolute terms? Or are they at the same levels? Or in some banks and in some instances are they rising?" he asked.

"There is no major concern on NPAs at present," he said. However, with the economy growing at nine per cent in the last two years and with bank credit growing at 30 per cent in the last four years, substantial assets had been built up.

"A whole lot of industries have come up, entrepreneurs have come up and a lot of homes and automobiles have been bought. There could be NPAs arising because of the sheer size of the assets built up," he said, adding his speaking about a possible NPA problem should be understood in this context.

"The best financial experts could not predict the impact of the US sup-prime crisis...How many sub-prime were dwelling in India? The proactive treatment of risk is supremely important," he said.

On sustainability of growth, Bhatt also listed absence of a roadmap for investments into India, the weak corporate debt market and the dilemma of the public sector banks to raise capital without the government owners losing control or direction Banks in India have been raising funds to meet the demand for loans from consumers and corporates with the economy growing at over 9 per cent.

Earlier this year, private sector ICICI Bank raised $4.9 billion in the country''s biggest-ever share sale, while HDFC Bank raised $698 million by selling American Depositary Shares (ADS) to strengthen its capital base and to support future growth.


also see : Other reports on State Bank of India
General reports on Banks