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Govt buys RBI stake in State Bank of India

The government acquires the entire RBI stake of 59.73 per cent in SBI at around Rs 35,531 crore.

india Updated: Jun 29, 2007 21:56 IST

In its biggest ever cash purchase, the Union Government on Friday acquired the entire RBI stake of 59.73 per cent in the country's largest lender SBI at around Rs 35,531 crore.

The government purchased 31.43 crore shares of RBI at a rate of Rs 1,130.35 per share as per the SEBI guidelines, a finance ministry official said.

The SBI share ended at Rs 1,525.30, up Rs 54.95 or 3.74 per cent, on the BSE on Friday.

Finance Minister P Chidambaram had provided a sum of Rs 40,000 crore in the Budget for 2007-08 for the deal.

The deal, carried out on the last working day of the RBI's financial year, will not have revenue implications for the government since the central bank is expected to transfer the surplus to the Centre during the first half of August.

"This is only transfer of shares and there is no change in the structure of the board of directors and management of SBI," the official said.

In Mumbai, SBI Chairman OP Bhatt had on Thursday said the government equity would be brought down to 51 per cent once necessary transfer of RBI shares in SBI to the government takes place.

The move was taken following the Narasimham Committee II report that it is inconsistent with the principles of effective supervision that the regulator is also an owner of a bank, the official said.

On the same ground, the government would also acquire RBI shareholding in National Housing Bank and NABARD by June 2008. RBI holds 72.5 per cent in NABARD and 100 per cent in NHB.

The government had promulgated SBI Amendment Ordinance 2007 on June 21 to amend State Bank of India Act 1955 for buying RBI's entire shareholding in the bank.

First Published: Jun 29, 2007 21:31 IST