Amid the debate over whether RBI should hold stake in lending institutions or only

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be a regulator, the central bank has sold almost all its holding in the apex agriculture and rural development bank, Nabard, to the Government of India.

"The Reserve Bank of India divested its stake amounting to Rs 1,430 crore in National Bank for Agriculture and Rural Development (Nabard) on October 13, 2010. With this, the Reserve Bank's holding in Nabard has come down to one per cent of shareholding in NABARD. The Government of India now holds 99 per cent of the stake," the central bank said in a statement here.

The move comes more than three years after the Reserve Bank of India (RBI) sold its entire stake in the country's largest lender State Bank of India to the government.

The Reserve Bank held 72.5 per cent of equity in Nabard amounting to Rs 1,450 crore. The remaining shareholding worth Rs 550 crore was with the Government of India.

The Union Cabinet in May 2008 had approved RBI' proposal to transfer its share holding in Nabard to the Government.

Now, the only major institution where RBI holds a stake is National Housing Bank (NHB). The central bank hold 100 per cent stake in the housing finance regulator.

Nabard is the apex rural and farm development bank, whose role is to promote credit growth in these areas.

In its biggest ever cash purchase, the Government in July, 2008 acquired the Reserve Bank of India’s entire 59.73 per cent stake in State Bank of India at over Rs 35,531 crore.

The move was in line with the Narasimham Committee II report which held that it was inconsistent with the principles of effective supervision that the regulator is also an owner of a bank.

On the same principle, it was decided that the Government would also acquire RBI’s shareholding in NHB and Nabard.

For buying stake of RBI in Nabard and NHB, the Government had earlier this year, provided for Rs 1,900 crore in the first supplementary demand for grants.

The buying of stake in these institutions would enable the government to have greater say in the board of these institutions and issue directions to meet its credit objectives for targeted areas.