However, the SBI chairman indicated that the Bank is unlikely to go in for a rights issue immediately as it has enough capital and good liquidity position at the moment

The country's largest lender, State Bank of India (SBI), would prefer a rights issue to raise funds for business growth rather than diluting government holding, its chairman OP Bhatt said on Wednesday, reports PTI.

"I want the government to continue to be the major stakeholder in SBI. If there is an opportunity to raise capital quickly and efficiently, we would like to do that (rights issue). It gives us a lot of flexibility in (the) future," Mr Bhatt told reporters in Mumbai.

The government recently tabled the SBI Act Amendment Bill in the Lok Sabha with an aim to reduce state-holding in the bank to 51% from around 59% now.

However, Mr Bhatt indicated that the Bank is unlikely to go in for a rights issue immediately as it has enough capital and good liquidity position at the moment.

SBI has a surplus liquidity of close to Rs50,000 crore, against Rs75,000 crore in December.

"I keep saying that we have a five-year perspective. We do not need capital immediately because our capital adequacy ratio is now around 14%," Mr Bhatt said.

On the merger of State Bank of Indore with the parent, Mr Bhatt said that the proposal needed to be cleared by the Government and Boards of both banks. The entire process may take over a month to get completed.