Govt borrowings to fund SBI stake buy: FM

Finance Minister P Chidambaram today said the government's additional borrowing in the first half of 2007-08 will be utilised to buy the Reserve Bank's (RBI) stake in State Bank of India (SBI).

"Government has raised additional money through bonds basically to finance purchase of central bank's stake in the SBI," P Chidambaram told reporters today.

The government has raised Rs 5,000 crore from the money market, outside its scheduled borrowing programme for the first half of the current financial.

In his Budget speech, Chidambaram had announced that the government would buy the 59.7 per cent stake of SBI from RBI at an estimated market value of Rs 40,000 crore to separate ownership and regulatory functions of the central bank.

Since the process has to be completed by June 30 (the end of RBI's financial year), the government has to arrange the money by that date.

Declining to elaborate, whether the government would raise additional money through bonds, he said, "We have to wait for the first installment of the advance tax collection, which is due on June 15."

The transaction, however, would be cash neutral as the central bank would return the money to the government as dividend.