Making the National Housing Bank (NHB) and the National Bank for Agriculture & Rural Development (NABARD) fully government-owned entities, the Reserve Bank of India (RBI) has sold its entire stake to the government for Rs 1,450 crore and Rs 20 crore, respectively.
While the central bank has sold its stake in NHB on 19 March, it sold the stake in NABARD on 26 February, said the bank in its official communiqué.
“With this divestment, the government now holds 100 percent stake in both these financial institutions,” said RBI.
The step is taken in alignment with the cross-holding in regulatory institutions and follows the guidelines of the second Narasimham committee report of October 2001.
It also followed the RBI’s own discussion paper on the same entitled ‘Harmonising the role and operations of development financial institutions and banks.’
The Narasimham panel had said that the RBI cannot own the entities which are regulated by it.
The RBI said divestment of its shareholding in NABARD was done in two phases. The central bank held 72.5 percent equity in NABARD worth Rs 1,450 crore, of which 71.5 percent amounting to Rs 1,430 crore were divested way back in October 2010 and the residual shareholding was divested on 26 February, 2019. The RBI held 100 percent shareholding in NHB, which was divested on 19 March 2019.
Following the second Narasimham committee recommendations, the RBI had transferred its ownership in the State Bank of India (SBI), NHB and NABARD to the government in October 2001.
Accordingly, the government had bought out the complete 59.7 percent stake in SBI from the Reserve Bank.
The recent change in the capital structure of both NHB and Nabard was done by the government through amendments to the NABARD Act of 1981 and the NHB Act of 1987, notified on 19 January 2018 and 29 March 2018, respectively.