Low Float: PSU Banks and CPSEs May Get 2-Years Time to Meet Shareholding Norms

India’s state-run companies and public sector banks that have yet to comply with the minimum public shareholding (MPS) norms are likely to receive a two-year extension, extending the deadline to August 1, 2026. This development is based on reports and a letter dated July 19, addressed to SEBI Chairperson Madhabi Puri Buch by the Department of Economic Affairs’ Financial Markets division, which requested the market regulator to take the necessary action on this matter.

The Status of State-Run Banks

Five state-run banks are currently holding government stakes exceeding 75%. These banks include Indian Overseas Bank, UCO Bank, Central Bank of India, Punjab & Sind Bank, and Bank of Maharashtra. The government holdings and the required reductions to comply with MPS norms are as follows:

Beyond Banking: Other State-Owned Enterprises

In addition to these state-run banks, there are other government enterprises, such as Indian Railway Finance Corporation (IRFC) and Satluj Jal Vidyut Nigam (SJVN), where the government stake exceeds 75%. These enterprises will also benefit from the proposed extension, providing them additional time to align with the MPS norms.

The Journey of MPS Regulations

The SEBI introduced the Minimum Public Shareholding regulations in 2010, aiming to enhance market liquidity and ensure a diversified ownership base. These regulations mandate that listed companies must have at least 25% public shareholding.

LIC Free Float

In May of this year, India’s largest life insurance company, Life Insurance Corporation of India (LIC), received an extension to achieve 10% public shareholding by 2027. Currently, LIC’s public float stands at just 3.5%. This special consideration underscores the challenges faced by large state-run entities in meeting the MPS norms within the stipulated time frame.

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.