Indian Government Plans To Offload Stake in Four Public Sector Banks

The SEBI Minimum Public Shareholding (MPS) regulations typically require that listed companies in India maintain at least 25% of their shares in public hands. However, in the case of government-owned public sector banks (PSBs) and companies, SEBI made adjustments in August 2014, allowing these banks to meet a reduced requirement of just 10% public shareholding. This threshold is significantly lower than the 25% mandated for other listed companies.

To maintain SEBI’s MPS norms 

The Indian government is looking into the possibility of divesting minority interests in four government-owned banks, as reported by a government insider to Reuters. The finance ministry is expected to seek the federal cabinet’s approval in the upcoming months to reduce its holdings in the Central Bank of India, Indian Overseas Bank, UCO Bank, and Punjab and Sind Bank, according to the source.

As of the end of September, the government holds over 93% of the Central Bank of India, 96.4% of Indian Overseas Bank, 95.4% of UCO Bank, and 98.3% of Punjab and Sind Bank, based on data from the BSE’s website. The proposed strategy involves selling these stakes through an open market offer, as indicated by the source. Following this news, banks’ shares saw an increase of 3% to 4%.

SEBI MPS norms to hold 25% public shareholding 

The Securities and Exchange Board of India (SEBI) mandates that listed companies have a minimum of 25% public shareholding; however, government-owned enterprises have been granted an exemption from this requirement until August 2026. The source did not provide any insight into whether the government plans to meet the regulator’s timeline or if it will request an additional extension.

An official stated that the timing and amount of the sale will be determined based on market conditions. This official requested to remain unnamed, as they are not authorized to speak to the press. The finance ministry of India has not yet responded to a request for comment.

QIP is a way to raise money

In the past, the government’s ownership of state-run banks has decreased as a result of public sector banks using qualified institutional placements (QIP) to raise capital. In September and October, respectively, Punjab National Bank and Bank of Maharashtra raised Rs 5,000 crore and Rs 3,500 crore through a QIP.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.