RBI to divest its stake in SBI to the Indian Government

The Union Cabinet has approved the transfer of Reserve Bank of India’s (RBI) shareholding in State Bank of India (SBI) to the Indian Government by June 2007 with a view to let the RBI focus exclusively on regulation, the Cabinet has also assented for the transfer of RBI’s stake in the unlisted National Bank of Agriculture and Rural Development (NABARD) and National Housing Bank (NHB) to the government at book value by June 2008.

The estimated acquisition cost of RBI's 59.7% stake in SBI to the government is likely to be around Rs. 40,000 crores, at a price of Rs. 1300 per share in an all-cash deal. It is to be noted that a bill is likely to be approved in the forthcoming budget to amend the SBI Act to reduce the minimum holding of the government or RBI from 55% to 51%. The move is aimed at giving the bank leeway to divest more equity to public to raise capital to fund growth. The follow-on public offer of SBI is likely to come after the majority share transfer to the government.

Read the article in Business Standard.