By IANS
New Delhi : The government is now the largest shareholder in State Bank of India (SBI) after it paid a whopping Rs.355.31 billion ($8.7 billion) to the Reserve Bank of India for a 59.73 percent stake in its largest cash purchase to date.
The deal was proposed as it was felt that the Reserve Bank of India (RBI) being the watchdog for the banking sector should not hold equity shares in a bank that it regulates, an official statement said Friday.
"It is inconsistent with the principles of effective supervision," it said.
"An ordinance was promulgated to provide requisite statutory provisions in State Bank of India Act, 1955 to facilitate this transaction, and government appointed June 29, 2007 the date for transfer of stake," the statement said.
The valuation, the statement said, was worked out on the basis of the guidelines set by markets regulator Securities and Exchange Board of India for the sake of transparency even though the government was not bound to follow them.
The transaction involved the purchase of 314.34 million equity shares with face value of Rs.10 at the rate of Rs.1,130.35 per share.
The regulator will also divest its 100 percent stake in National Housing Bank (NHB) and the 72.5 percent holding in the National Bank for Agriculture and Rural Development (NABARD) in favour of the government eventually.