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Union cabinet approves transfer of RBI’s stake in NHB to govt

06 Jan 2012 Evaluate

The Union Cabinet has approved the proposal for transfer of the Reserve Bank of India's (RBI) stake in the National Housing Bank (NHB) to the government and the further course is likely to be concluded by March-end. NHB Chairman and Managing Director R V Verma on the sidelines said, ‘the cabinet has approved the amendment to the National Housing Bank Act, 1987, for transferring RBI’s stake in the NHB to government.’

The Cabinet Committee on Economic Affairs (CCEA) headed by Prime Minister Manmohan Singh deliberated upon the proposal on January 5, and the process of stake transfer is likely to be over within two months. NHB is looking at increasing its capital base and would start discussion on the matter with the government soon.

Currently, NHB is wholly-owned by the RBI with a paid-up capital of Rs 450 crore. In the last Budget for meeting the expenditure for acquiring RBI's holding in NHB, the government had made Budget provision of Rs 450 crore. NHB was formed to promote a sound, healthy, viable and cost effective housing finance system to cater to all segments of the population and to integrate the housing finance system with the overall financial system.
Earlier, the government has already acquired stake of State Bank of India (SBI) and National Bank of Agriculture and Rural Development (NABARD) from RBI. In 2007, the government acquired the 59.73% stake held by RBI in SBI, for Rs 35,531.33 crore. Though, NABARD stake transfer happened in 2010. The RBI divested 71.5% equity in NABARD, worth Rs 1,430 crore.

In order to differentiate the apex bank’s position as the owner of banks and the sector regulator, the Narasimhan Committee had recommended the transfer of RBI's stake in SBI, NABARD and NHB to the government. Further, after receiving rights of NHB, the government would also have a greater role in the boards of these institutions and the flexibility to issue directions to meet its credit objectives for the priority sector.

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