SBI Current Affairs - 2019
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The Reserve Bank of India (RBI) has sold its entire stakes in the National Bank for Agriculture & Rural Development (NABARD) and National Housing Bank (NHB) for Rs 20 crore and Rs 1,450 crore respectively.
Disinvestment by RBI
- The decision to divest its entire stake was taken based on the recommendations of the second Narasimham Committee. The committee had stated that RBI could not own those entities which are regulated by it.
- The government now holds a 100 per cent stake in both NHB and NABARD.
Earlier in June 2018, the government had bought out the entire 59.7 per cent stake in SBI from the Reserve Bank.
State-owned Power Finance Corporation (PFC) has completed the acquisition of majority stake in REC Ltd by transferring Rs 14,500 crore to the government.
The merger of both the entities is expected to be completed in the next fiscal year in consultation with the government. This acquisition and merger will make PFC second-largest government-owned financial player in the country based on the current market capital after State Bank of India (SBI) and also PFC will be the third-highest profit-making financial player in India.
About the Acquisition
- PFC paid Rs 14,500 crore to the Union government to buy a 52.63% stake in REC.
- This acquisition results in an $80-billion lending giant by assets and potentially helps in faster resolution of stressed assets in India’s power sector.
- The acquisition also helped the union government exceed its disinvestment target of Rs 80,000 crore for the fiscal year 2018-19.
- The consolidation will help in raising funds at competitive costs and lead to convergence of lending policies and rates.
- Further, it will also help in improving asset quality and impress upon state utilities to improve their performance.
PFC taking over REC makes it a dominant player not only in the power sector but also in the entire financial market space. PFC’s strategic importance to the government will further increase upon completion of the acquisition as the combined entity will become the biggest non-bank finance entity in which the government holds a controlling stake.
Since the PFC and REC have a robust presence in the consortium of lenders to power companies, the consolidation will help in the faster resolution of stressed assets.