The country's largest lender State Bank of India (SBI) today said the government's stake

RELATED ARTICLES Petrol hike: Govt to watch situation before any rollback Lehman to buy 26.5% stake in Archstone for $1.58b Petrol price hike: Delhi govt may provide relief to people Canada, German firms eye Reliance Cap unit stake Govt may soon take decision on FDI in aviation, retail

in the company is likely to increase by up to 2.5 per cent following the capital infusion of Rs 7,900 crore.

"If you go by the past share price of SBI, it (the price of preferential allotment) is likely to be somewhere about Rs 1,800 to 2,000. If that is the range that is going to happen, then government equity shares will go up by 2-2.5 per cent," SBI Managing Director Diwakar Gupta told reporters here.

At present, the government of India holds a 59.4 per cent stake in SBI.

Gupta said the preferential allotment would be governed by the guidelines of market regulator Sebi, which is the higher of the six-month average or 15-day average share price of the company.

The capital infusion by the government will raise the Tier-I capital of the bank to about 8 per cent.

He said SBI would need about Rs 15,000 crore of additional capital and the infusion could happen by way of qualified institutional placement (QIP), a follow-on public offer (FPO) or a rights issue.

"We would be needing about Rs 15,000 crore of additional capital. For the current year, the calculation is closer to Rs 8,000 crore for Tier-I," Gupta added.

He said SBI has submitted a rough plan of its capital requirement for the next five years to the government. "The total capital required over three years is Rs 28,000 crore. The 15,000 crore is part of that," Gupta added.

SBI had raised over Rs 16,000 crore through a rights issue in 2008. In the last SBI rights issue, the government contribution to the bank was in the form of bonds, rather than cash.

As of September, 2011, the capital adequacy ratio (CAR) of SBI stood at 11.4 per cent. Of this, Tier-I capital stood at 7.47 per cent at the end of second quarter against the minimum 8 per cent level desired by the government.