Govt may pick up RBI’s stake in NABARD next fiscal

The government may pick up Reserve Bank’s stake in the National Bank of Agriculture and Rural Development (NABARD) next fiscal, for which it had earmarked Rs 1,450 crore in the Budget.

Sources said, the government in consultation with the RBI has decided to acquire 72.5 per cent of the overall shareholding in the NABARD, currently held by the apex bank, taking its holding in the institution to 100 per cent.

The government is working on this and stake transfer is expected next fiscal, official sources said.

For the stake transfer, the government has already made a Budgetary provision of Rs 1,450 crore, sources added.

NABARD with a paid-up capital of Rs 2,000 crore, was set up as an apex development bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts.

It was the Narasimhan Committee that recommended the transfer of RBI’s stake in State Bank of India, NABARD and NHB to the government so as to define the central bank’s functioning as the owner of banks and the sector regulator.

In 2007, the government acquired 59.73 per cent stake held by RBI in the country’s largest bank SBI for Rs 35,531.33 crore.

Sources said the stake transfer is not likely to affect the functioning of rural credit delivery system in the country as the policies will continue to be shaped by the government in consultation with the RBI.

After getting ownership of SBI, NABARD and NHB, the government would also have a greater say in the boards of these institutions, besides flexibility to issue directions to meet its credit objectives for the priority sector.