Manojit Saha & Suvashree Ghosh

Mumbai: While 2007 saw the country’s second largest lender ICICI Bank coming out with the biggest ever equity issue of Rs 20,000 crore, 2008 will see another mammoth issue of Rs 16,700 crore from State Bank of India.

After the country’s largest bank State Bank of India (SBI) announced its plan of a rights issue, other state-run banks followed suit.

State-run banks will make a beeline to raise equity capital to meet regulatory requirements arising out of Basel-II implementations, business growth and competition from foreign peers.

In 2007, ICICI Bank had raised Rs 10,000 crore each from domestic and global markets. Two other large private sector banks—HDFC Bank and Axis Bank (erstwhile UTI Bank) also raised funds though from foreign issuance.

“Banks are pretty well prepared to meet their Basel II norms. While in the first half of 2007-08, major private sector banks already raised capital, public sector banks are gearing up in the next year,” said Rakesh Kumar, senior banking analyst, Karvy Securities.

Besides SBI, Bank of India has also announced its plan of raising Rs 1,400 crore via qualified institutional placement end of January. Other government-owned banks, Kolkata-based UCO Bank, Udupi-based Syndicate Bank and Mumbai-based Union Bank of India and Bank of Baroda are also expected to tap the equity markets in the early part of 2008.

While UCO Bank will issue 90 million shares that will dilute about 23% government shareholding, Syndicate will issue 80 million shares which will dilute 8% government stake. Post the issue, government holding in UCO Bank and Syndicate will be 52% and 58%, respectively.

Source : DNAIndia