RBI may block Citi's plan to buy 3% in NSE

Citigroup already holds 2 per cent in the exchange.

The Reserve Bank of India (RBI) may block Citibank India's proposal to pick up 3 per cent stake in the National Stock Exchange (NSE).

A source close to development said the bank proposed to buy shares from the State Bank of India group, which holds 12 per cent (9 per cent by the State Bank of India and 3 per cent by subsidiary, SBI Caps).

The bank has submitted a proposal to the RBI. A Citibank spokesperson, however, did not comment on the issue.

The banking regulator is of the view that Citibank India is a member of the Citigroup, which already owns 2 per cent stake in the NSE. Therefore, granting permission to Citibank India may lead to conflict of interest among related entities holding stake in the same entity.

As per the demutualisation norms, an individual entity cannot hold more than 5 per cent stake in an exchange. SBI and SBI Capital Markets have already pared their stake by 3 per cent and 2 per cent, respectively ,thus bringing down the combined stake to 12 per cent from 17 per cent earlier.

While Morgan Stanley acquired 3 per cent stake in NSE, Actis holds 1 per cent.

NSE has institutional holding from SBI, Industrial Development Bank of India, Corporation Bank, Oriental Bank of Commerce, Union Bank, Bank of Baroda and Canara Bank.

Thus, NSE has already offloaded 26 per cent stake in favour of foreign investors as permissible under the foreign direct investment norms for stock exchanges.

NSE's rival, the Bombay Stock Exchange, has also offloaded 5 per cent each to Deutsche Borse and Singapore Stock Exchange.