Mumbai : State Bank of India Chairman OP Bhatt on March 11 said the country's largest lender would prefer to raise capital through a rights issue of equity shares, rather than dilution of the government holding, to fund growth.

"I want the government to continue to be the major stake holder in SBI ... If there is an opportunity to raise capital quickly and efficiently, we will like to do that (rights issue) ... It gives us a lot of flexibility in future,' he told reporters on the sidelines of a seminar on capitalism organised by the Confederation of Indian Industry (CII).

The Union government had introduced a bill to dilute its minimum permissible equity in the bank from the present 55 per cent to 51 per cent, among other changes in the SBI Act. The present equity of the government is about 59 per cent. On a global offering, Bhatt said the bill provides room to raise funds through American Depository Receipts. "Our Global Depository Receipts are already listed. The provision will also give us an option to tap the American market. However, there are no plans for using this route."

Bhatt indicated the bank was unlikely to go for a rights issue soon, as it had enough capital and a good liquidity position. "The bank has a five-year perspective. We do not need capital immediately, because our capital adequacy ratio is now around 14 per cent," he said. On the merger of State Bank of Indore with the parent, he said the Reserve Bank of India had given its in-principle nod for the merger between the two entities. The proposal needed to be cleared by the government and the boards of both banks.