Govt.’s plan to buy stakes in NHB, NABARD laid off
By Joseph Samson
Mar 29, 2010
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The Government's plans to buy out RBI's stakes in National Housing Bank (NHB) and NABARD have been abandoned. The Government has agreed to objections laid by RBI on the issue and has decided to lay off the plan as of now.

The Narasimhan Committee had recommended that the Government should buy out RBI's stake in NHB and NABARD so that RBI's chief functioning as owner of banks and banking as well as monetary regulator remains in priority.

The Government was to pick up stakes in NABARD and NHB this fiscal and had also apportioned the amount needed for the purchase in budget 2010-11. But the Government now has dropped the allocation of Rs. 1900 crore for the purpose.

A senior government official said that the delay and final lay off of this plan for developing the real estate sector as well as agricultural financing could have been avoided if the Financial Stability and Development Council would have been set up at an appropriate time.

NHB acts as a regulator cum prime bank for the real estate sector while NABARD has regulatory roles in agricultural financing. It is the chief refinance organization for agriculture and SMEs.

The Government had plans to list these two entities so that they emerge as strong leaders. But this will not be possible until the RBI gives its nod.

Three years earlier it was decided in the cabinet that the shareholding of RBI in both these entities should be purchased by the Government. This decision was taken so that RBI could be kept at a distance from its interests in these organizations.

The same decision was also taken for the State Bank of India. The government acquired 59.73 per cent stake held by RBI in SBI for Rs 35,531.33 crore in 2007.


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