North Block working on SBI stake sale

The finance ministry is working out the modalities for sale of Reserve Bank of India's stake in State Bank of India to the government, Secretary (Financial Sector) Vinod Rai said today.

RBI currently holds 59.73 per cent stake in SBI.

"We are likely to decide the mechanism by December. We are working on making it cash neutral," Rai said on the sidelines of a meeting with chiefs of public sector banks.

Based on SBI's current market price, the government will have to fork out nearly Rs 350 billion to buy RBI's stake in India's largest commercial bank.

Since RBI is the regulator of the banking sector, its stake in SBI tantamount to a conflict of interest.

A senior finance ministry official had told last month that the stake transfer was likely to happen in June.

Since RBI's financial year ends in June, the amount generated from SBI stake sale can be transferred to the government as a dividend in July.

Along with the move on SBI's stake transfer to the government, the Cabinet has also approved an amendment in the SBI Act to allow dilution of RBI/government's stake in the bank to 51 per cent from the current floor of 55 per cent. This will help SBI raise additional resources.