To seek shareholders’ ratification in July
The bank said it is weighing different formats of share issue for the same and will seek shareholders’ approval to this end in mid-July.
A general meeting of shareholders of SBI will be held on Tuesday, July 14, 2O2O, at the State Bank Auditorium, State Bank Bhavan Complex, Madame Cama Road, Mumbai.
“lf 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 informed the stock markets through a regulatory filing.
The statement said, “the bank will seek shareholders’ nod in the meeting “to create, offer, issue and allot, such number of equity shares of Re1 each, for an amount not exceeding Rs20,000 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”.
It further explained that 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.
The bank also added that 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 order to maintain a healthy capital adequacy ratio (CAR).
As of March 31, 2020, SBI’s overall Capital Adequacy Ratio (CAR) 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 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,” the bank noted.
“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 explained.
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.
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 Rs20,000 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.