Banks to decide if KFA deserves working loan tomorrow: SBI

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Banks to decide if KFA deserves working loan tomorrow: SBI

State Bank of India's chairman Pratip Chaudhuri said it was a matter of concern that Kingfisher Airlines is in the non-performing asset (NPA) category.

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State Bank of India , India's largest lender, has received Finance Ministry approval for a capital infusion of Rs 6,000-8,000 crore.

The capital infusion will be made by March 31, the bank's chairman Pratip Chaudhuri was reported as saying.

Shares in the state-run lender rose as much as 2.6% to Rs 1,825 immediately after the report.

Chaudhari told Sethi that it would happen before March 31, 2012, which reiterated the banking secretary's point. He said several times that the capital infusion will take place before March 31. The banking secretary had told CNBC-TV18 a few days back that the proposal for capital infusion would be put up to the Finance Minister.

Today, Chaudhari confirmed that both the Finance Minister and the Planning Commission have given the go ahead for capital infusion in SBI. This will be between Rs 6,000-8,000 crore and will be done through a preferential allotment of equity. Currently, the tier-I capital of the bank is around 7.4%.

The government will see this go up to 8% and after this capital infusion it is likely to go beyond that. Also, the government's holding will go up from the current 59.4% to over 60%.

Again, the government's holding in the country's largest lender will also be strengthened. This is much needed good news for SBI after waiting for capital infusion for almost two years.

With the government's stake in the PSU going up to 64%, questions are now arising if a follow-on offer is on the table again.

However, Chaudhuri said - one thing at a time. "Let this capital come in, let us finalize our financials as on March 12 and then we will take stark and decide on future course of action and consult the government also on future capital infusion, regarding the mode and regarding the instrument and all these things."

Chaudhuri told CNBC-TV18 in an exclusive that there was no pressure from the Finance Ministry to pay a higher dividend in the current fiscal. The ministry said that it was keen to approach the topic of dividend only if there was strong capital growth.

December 2011's headline inflation eased to 7.5% from 9.1% in November 2011, chiefly led by a decline in primary food inflation (to 0.7% from 8.5% in Nov 2011.

The number is in line with market expectations but analysts don't see the RBI cutting the CRR at next weeks credit policy review. Chaudhuri felt that the RBI has a litle more room to maneuver at the meeting. "But I don't think inflation expectations have come down," he added.

Due to client confidentiality concerns he was unable to expand on Kingfisher Airlines' debt woes. He said it was a matter of concern that the ailing carrier is in the non-performing asset (NPA) category. Kingfisher defaulted on some dues which are beyond the 90 days time-period.

Also read: No overseas high for Kingfisher Airlines!

The consortium of banks will decide at a meeting tomorrow if KFA deserves a working capital loan. "We will do everything possible to have an orderly restructuring of the company's finances," he said.