RBI to transfer Nabard, NHB stakes to government
19 Feb 2008
Mumbai: The Reserve bank of India (RBI) will transfer its holdings in its two subsidiaries - National Bank for Agriculture and Rural Development (Nabard) and the National Housing Bank (NHB) - to the government in the 2008-09 financial year.
RBI will transfer its stakes in Nabard and the NHB at a book value of about Rs1,900 crore ($475 million) and the announcement of this is likely in the union budget on February 29.
Nabard stake would be valued at around Rs450 crore, and NHB at around Rs1,450 crore, sources said.
The RBI owns 72.5 per cent of farm lender NABARD and 100 per cent of NHB, which lends to housing finance companies.
RBI had already sold its 59.7 per cent stake in State Bank of India, the country's largest bank, to the government for Rs35,530 crore, but returned the sale proceeds in its annual dividend to the government, making the transaction budget neutral.
The stake sale to government is aimed at avoiding conflict of interest at RBI - of being a regulator and lender at the same time.
Nabard, which is to play a key role in implementing the government's farm loan waiver package, has sought income tax exemption. In a fresh appeal to the government, Nabard said its current income tax outgo could be ploughed back to strengthen the National Rural Credit Fund (long-term) and build a proposed fund for short-term credit.
Nabard has argued that being made to pay income tax has deprived it of the ability to plough resources back into the agriculture sector. Nabard has paid a total of Rs2,861.11 crore as income tax since 2001-02.
According to Nabard, the provision of resources for long-term credit to the farm sector received a severe setback in 1992-93 due to the government decision to appropriate the entire surplus of the Reserve Bank of India and not leave any amount for strengthening the Nabard fund. Further, in 2001-02, the Centre imposed income tax on Nabard.
