State Bank of India, the country's biggest bank, plans to raise at least 100 billion rupees ($2.5 billion) in a share sale before the end of the year, Chairman O.P. Bhatt said on Wednesday.

The listed government-run bank had not decided the size or exact timing of the equity sale, or whether shares would be offered in the domestic or foreign markets, he said.

That we are still finalising, he told reporters at a banking conference.

Separately, banking sources told Reuters that SBI had raised 35 billion rupees ($865 million) through an issue of Upper Tier II bonds, more than double the 15 billion rupees it was looking to raise, sources familiar with the deal told Reuters.

Indian banks have been raising funds to meet the demand for loans from consumers and corporates in Asia's third-largest economy, which grew 9.4 percent in the fiscal year to March 2007.

Earlier this year, leading private bank ICICI Bank (ICBK.BO: Quote, Profile, Research)(IBN.N: Quote, Profile, Research) raised $4.9 billion in India's biggest-ever share sale, while HDFC Bank (HDBK.BO: Quote, Profile, Research) (HDB.N: Quote, Profile, Research) raised $698 million by selling American Depositary Shares (ADS) to strengthen its capital base and to support future growth.

In June, Bhatt said SBI might need up to 500 billion rupees in the next few years to expand and invest in ventures including insurance, private equity and wealth management. Shares of the bank, which trade at 16 times estimated earnings, closed 0.1 percent higher at 1,624.15 rupees in a Mumbai market that fell 0.2 percent.

The bank, valued at $21 billion, has seen its shares rise more than 75 percent in the past year, according to Reuters data.

(Additional reporting by Anurag Joshi and C.J. Kurrien)

($1=40.5 rupees)

State Bank of India India Sale