Govt to fuel SBI's growth plans

NEW DELHI/MUMBAI: The government, which is now the dominant shareholder of the State Bank of India, is planning to provide capital to the bank. Capital infusion by the government to the country’s largest bank may well be called for considering the business needs of SBI over the next couple of years. The move will also give SBI more leeway in raising funds which is capped due to the law that prevents the owner (now the government) from diluting its stake below 55%.

Government officials said the Centre would provide assistance to the bank to ensure that its business growth is not hampered. Assuming that the government infuses Rs 10,000 crore and if this is leveraged to build a portfolio by an additional Rs 1,00,000 crore, the resulting dividends and the tax on increased profits will make up for the government’s capital costs. Even at a 1% return on assets, the government could recover a significant amount from the bank, sources said.

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