Special Correspondent

SBI's equity transfer cost is put at Rs. 40,000 cr.

  • Valuation of SBI shares will depend on market price
  • Nabard, NHB transfer at book value

    NEW DELHI: In a bid to separate ownership interests from the regulatory functions of the Reserve Bank of India (RBI), the Central Government has decided to acquire the central bank's shareholding in State Bank of India (SBI), the National Bank of Agriculture and Rural Development (Nabard) and the National Housing Bank (NHB) through cashless "book entry" transactions.

    Briefing newspersons after the Cabinet meeting here on Thursday, Finance Minister P. Chidambaram said: "Following the Narasimham Committee report, the Union Cabinet has approved the proposal." Accordingly, by June, the Government will acquire the 59.73 per cent equity stake held by the RBI in SBI. Based on the SBI's "reference'' price of about Rs. 1,300 a share as per the SEBI formula, the equity transfer transaction cost is estimated at Rs. 40,000 crore.

    However, since the RBI is also a government institution, it will have to repay whatever it receives for the transfer of its shareholding in the three state-owned financial institutions.

    "It will be a book entry transaction, as whatever I pay to RBI, I will get back," Mr Chidambaram said.

    Without specifying whether the transfer of stake would be completed before SBI's proposed initial public offering (IPO), Mr. Chidambaram said: "I can only say that the transaction will be completed by June 30." The exact valuation of SBI shares would depend on the market price on that day in accordance with SEBI guidelines. On the other hand, since the other two institutions, Nabard and NHB, are not listed on the bourses, the RBI shareholding would be transferred to the Government at the book value at an appropriate time, preferably by June 2008, Mr Chidambaram said.

    Following the transfer of shareholding, "RBI will be able to focus on its regulatory and supervisory functions, and it will also remove the conflict of interest in due discharge of its duties as the banking regulator and also having ownership in banks/financial institutions," an official statement said.