* Price set at 20.5 zlotys
* Investors to receive right to buy 0.25 shr for each owned
* Expects to net 4.9 bln zlotys ($1.8 bln) (Adds details, background)
WARSAW, Oct 1 (Reuters) - PKO,
The state-controlled bank said it plans to sell 250 million new shares at 20.5 zlotys each in eastern Europe's first such large rights issue. The sale will boost the number of PKO's existing shares by as much as a quarter.
Shares in PKO closed at 33.41 zlotys ahead of the announcement.
PKO joins a growing list of European banks seeking to tap
the markets with discounted right issues, including BNP
Paribas'
UniCredit
But, unlike many western rivals who will mainly use the fresh cash to repay government bailouts, PKO plans to use the 4.9 million zlotys it expects to net from the issue mainly to keep the credit flowing into Europe's largest ex-communist economy.
Poland has been among a handful of European countries to avoid recession, but some officials have grown concerned that increasingly conservative banks could stymie its recovery by withholding new loans.
But some analysts worry that state-controlled PKO could use the proceeds to support shaky state enterprises.
Controversy surrounding the cash call -- which was announced along with plans to extract as much as 3 billion zlotys in dividends to help plug a growing state budget hole -- led to the departure of PKO's previous chief executive, Jerzy Pruski.
Poland plans to retain its 51-percent stake by having another state owned bank buy up its share of the rights. (Reporting by Gabriela Baczynska and Chris Borowski; editing by Carol Bishopric)