The State Bank of India may rather opt to go for a rights issue than dilute its Government stake to 51% as propose in the SBI (Amendment) Bill, 2010, which was placed in Parliament on Monday.

As per the proposal set in the Bill, the bank should be allowed to dilute the Government stake from the threshold of 55% to 51%.

According to Chairperson, SBI Mr. O.P. Bhatt, the bank would prefer to keep the Government stake intact. The current Government stake in the bank is 59.41%.

On enquiry as to how much would the bank be able to earn if the Government stake is brought down to 51%, Mr. Bhatt said, "It depends on the share price but we can raise close to $4-5 billion (about Rs 22,000 crore). However, first we will want to exhaust the option of a rights issue."

Mr. Bhatt did not comment on any other possible route apart from rights issue that the bank might opt in for raising capital.

Mr. Bhatt said that SBI may raise at least Rs 10,000 crore next fiscal by way of rights issue. Earlier in 2008, SBI had raised close to Rs 16,736 crore by way of rights issue.

The bank estimates its capital requirements over the next five years to be around Rs 40,000-50,000-crore so that it is able to meet its growth needs, Mr. Bhatt said.

He also said that the bank might show an increase in the Net Interest Margin (NIM) by the end of this financial year.

"We posted an NIM of about 2.82 per cent during the third quarter of this fiscal and we are hopeful the margins will improve to about three per cent by the end of this fiscal," he quoted.

Speaking on the context of loan recovery he said, "We are incentivising people to enter into some kind of arrangement that will enable us to recover if not totally but at least a major part of the amount by the end of this fiscal."