The government will promulgate an ordinance to buy RBI's 59.7 per cent stake in the country's largest lender SBI for estimated cost of Rs 40,000 crore (Rs 400 billion).
"The ordinance, relating to amendments to the State Bank of India Act, 1955, would enable the transfer of RBI's shareholding in SBI to the central government," Information and Broadcasting Minister P R Dasmunsi told reporters after the Cabinet meeting in New Delhi.
He put estimated cost of the deal at around Rs 40,000 crore.
The deal would not have revenue implications for the government since the RBI is expected to transfer the surplus to the Centre during the first half of August. That way, the Centre would receive what it gives to the Reserve Bank for buying its stake in SBI.
Dasmunsi said a bill will be moved in the coming session of Parliament to replace the ordinance.
Sources said the finance ministry has sought Cabinet approval to issue an ordinance to amend the SBI Act, 1955 to ensure that the Centre hands over the cheque to RBI by June 30.
They said the ministry had to push for an ordinance as a bill to amend the Act is pending with a Parliamentary standing committee.
The ministry wanted to insert a clause enabling it to buy RBI's stake when it came back to the House, but in the absence of the standing committee report, it is pushing for an ordinance to close the transaction in time.
Although, the government got Parliamentary approval during the Budget session to enable SBI to reduce its stake in seven associated banks, it could not get approval for takeover of the RBI shareholding in the bank.
According to the final stake purchase plan, the government will issue a cheque on June 29, a day before RBI closes its annual books of accounts, the sources said.
A finance ministry official said the government will value 31.43 crore (314.3 million) SBI shares with face value of Rs 100 each, held by RBI, at the average closing price for the last six months and moving average for the previous fortnight.
Finance Minister P Chidambaram on June 12 said the government has raised about Rs 5,000 crore (Rs 50 billion) through bonds outside the scheduled borrowings to partly fund the deal.
The ministry expects to raise additional funds from advanced taxes, to be deposited by Friday.
Chidambaram in his budget speech had said RBI's stake in SBI would be transferred to the Centre in order to separate ownership and regulatory functions of the central bank.
