Date:30/06/2007 URL: http://www.thehindu.com/2007/06/30/stories/2007063050741600.htm

Business

Govt. picks up RBI stake in SBI

Special Correspondent

To acquire RBI’s shareholding in NHB and NABARD by June 2008

NEW DELHI: In its biggest ever cash purchase, the Centre on Friday acquired the Reserve Bank of India’s entire 59.73 per cent equity stake in State Bank of India (SBI) at over Rs. 35,531 crore.

As per the guidelines of the Securities and Exchange Board of India (SEBI), the Government picked up the entire 31.43-crore SBI shares held by the RBI at a price of Rs. 1,130.35 a share, according to a Finance Ministry statement here.

Cheering the transaction, SBI shares soared by Rs. 54.95 to Rs. 1,525.30 on the Bombay Stock Exchange.

In the budget for 2007-08, Finance Minister P. Chidambaram, it may be recalled, had provided an amount of Rs. 40,000 crore for the share purchase transaction.

Subsequently, an Ordinance was promulgated to provide the requisite statutory provisions in the State Bank of India Act, 1955, to facilitate this transaction, and the Government appointed June 29 as the date for transfer of stake.

The share purchase deal was in keeping with the Narasimham Committee II report which held that it was inconsistent with the principles of effective supervision that the regulator (RBI) is also an owner of a bank (SBI).

On the same principle, the Government would also acquire RBI’s shareholding in National Housing Bank (NHB) and NABARD by June 2008, the Ministry statement said.

The Reserve Bank holds a 72.5 per cent stake in NABARD and 100 per cent in NHB.