Mumbai: State Bank of India (SBI) will receive a hefty payout of ₹13,655 crore from the sale of a portion of SBI Funds Management’s shares starting Tuesday, followed by the National Stock Exchange (NSE) later this year. Analysts said the huge proceeds will bolster the bank’s capital, cushion its reserve requirements and support lending growth as the bank seeks to maintain its return on assets (RoA) above 1%.
India’s largest bank by assets is diluting a 6.3% stake in its asset management company through a ₹9,813-crore initial public offering (IPO) that opens on Tuesday. SBI has already raised ₹1,655 crore in its pre-IPO placement earlier this month. Even at the lower end of the price band of ₹545 to ₹574 per share, the bank could earn another ₹7,000 crore, public documents show.
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Cash cushion payouts from SBI Funds Management and NSE share sales are expected to enable the lender to accelerate loan loss provisioning and support credit growth.
The NSE IPO, which is likely to be India’s largest with an investment of ₹30,000 crore, is likely to take place in the current financial year with SBI being the largest shareholder offering to sell 24.75 million shares. While the price range for the issue is yet to be finalized, analysts expect SBI to raise at least ₹5,000 crore from its offer for sale for the issue.
Both these share sales together could boost SBI’s profit and loss account this year by around ₹13,655 crore. Sales of shares in companies are channeled through the bank’s other income into its profit and loss account, increasing the bank’s net worth and therefore capital.
SBI’s capital adequacy ratio at the end of March 2026 stood at 15.40%, higher than the 12.30% required for the bank, even with additional buffers required as it is a systemically important bank.
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Analysts say that with sufficient capital, the bank may decide to initially top up its reserves for the early years of expected credit losses (ECL) due to excess capital on its balance sheets.
SBI did not respond to an email seeking comment. “SBI has always maintained that its provisioning requirements for expected credit losses are manageable. Earlier, the bank had planned to build reserves over time, but now, with this monetization, it is possible that it may change its plans and pre-load some of these reserves,” said Nitin Aggarwal, analyst at Motilal Oswal Securities.
ECL provisions, or expected credit losses, calculate the amount of money banks must lend based on the likelihood of a loan defaulting. The central bank has allowed banks to distribute reserves under the new structure over a four-year period, starting with the fiscal year ending March 2028. SBI may decide to accelerate provisioning in the early years due to windfalls, analysts said.
Yuvraj Choudhary, analyst at Anand Rathi Securities, estimates that SBI’s capital adequacy will improve by 27-30 basis points due to capital inflows. One basis point is equal to 0.01 percentage point.
“We believe the impact of ECL will be manageable for most banks as both non-performing assets and slippages are under control. In this scenario, SBI can probably also use some of these funds for lending and ensure that they continue to grow faster than the system,” Choudhary said.
SBI’s provision coverage ratio, including technically written-off accounts, stood at 92% at the end of March 2026. The gross NPA of 1.39% is also at a two-decade low. “In the current scenario, it does not look like the new ECL norms will have much impact, but the bank may also decide to initially top up its reserves in view of the new norms,” said a senior bank official.