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Government to buy 59.73 per cent of State Bank of India

The government has finalised plans to buy the Reserve Bank of India's entire stake of 59.73 per cent in the country's largest bank, State Bank of India (SBI) by December 2006. The finance ministry is working out the modalities. Based on SBIís current market price, the government may have to pay nearly Rs 350 billion to buy RBIís stake.

The RBI had, in principle decided to exit from banks and institutions to avoid conflict of interest as a regulator. In addition to majority stake in State Bank of India, RBI fully owns- National Housing Bank(NHB), National Bank for Agriculture and Rural Development(NABARD), Deposit Insurance and Credit Guarantee Corporation of India(DICGC), Bharatiya Reserve Bank Note Mudran Private Limited(BRBNMPL).

Unlike other banks, SBI is governed by the SBI Act, which stipulates a minimum mandatory holding of 55 per cent by RBI. Cabinet has also approved amendments to the Act to facilitate raising of capital by the bank, which would mean RBI/governmentís stake in the bank to 51 per cent like other state-run banks.

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