Indian government has revived plans to acquire the Reserve Bank of India’s (RBI) interest in National Bank for Agriculture and Rural Development (Nabard) and National Housing Bank (NHB).
RBI may hand over its stake in Nabard and NHB to the Indian government this year, which will pave the way for listing of these two institutions, reported Business Standard.
Indian finance ministry is planning to make a provision of INR19bn for this transaction. Government of India is planning to allocate a sum of INR14.5bn and INR4.5bn for acquiring stakes in Nabard and NHB, respectively, according to the report.
Nabard, which is 27.5% owned by Indian government, has a paid-up share capital of INR20bn, of which RBI’s share is INR14.5bn. Government of India’s acquisition of RBI’s 72.5% stake in Nabard will take the government holding to 100%.
In line with the recommendations of the Narsimhan Committee on Banking Sector Reforms, in February 2007, the Cabinet cleared the proposal for government to acquire RBI’s stake in these two financial institutions by June 2008.
The stake transfer is not likely to change the functioning of rural credit delivery system in India as the regulatory and supervisory functions will continue to be shaped by the government in consultation with RBI.
After the stake transfer the government will also have greater say in the boards of the financial institutions, besides flexibility to issue guidelines to meet its credit objectives for the priority sector.