Govt moves to sell stake in public sector banks

Reports indicate that the banks whose govt stakes would be on sale could include the Central Bank of India, Indian Overseas Bank, UCO Bank, and Punjab and Sind Bank
Indian economy
(Mint)
Updated on
2 min read

India has invited bids for merchant bankers and legal advisers to help sell its minority stake in several public-sector banks and financial companies. The government is looking to reduce its ownership in these institutions via an “offer for sale” process, which was detailed in a document released on February 24 by the Department of Investment and Public Asset Management. However, the document didn’t specify which banks would be involved in the sale.

Shareholding reductions

Earlier reports in November indicated that the government is likely aiming to dilute its stake in a few key banks, including the Central Bank of India, Indian Overseas Bank, UCO Bank, and Punjab and Sind Bank. This move is part of a larger effort to comply with public shareholding regulations set by the Securities and Exchange Board of India (SEBI).

The regulator mandates that companies maintain at least 25% public shareholding, but government-owned firms are exempt from this rule until August 2026.

Govt's holdings in banks

The Indian government holds a substantial majority in these banks, with more than 93% in Central Bank of India, 96.4% in Indian Overseas Bank, 95.4% in UCO Bank, and a whopping 98.3% in Punjab and Sind Bank. For instance, the government also has an 80% stake in Bank of Maharashtra. Historically, such stake reductions have been achieved through mechanisms like Qualified Institutional Placements (QIPs), which have helped lower the government’s stake over time.

Merchant bankers and legal advisers will be selected for a three-year period, and the deadline for submitting bids is March 27, 2025. These advisors will be key in guiding the government’s divestment process.

While there were initial plans for larger privatisation, these have been paused, at least temporarily. Opposition from various ministries has led the government to shift its focus to smaller, minority stake sales instead. As of February 2025, the government has raised approximately ₹86.25 billion (around $993 million) through stake sales during the current financial year.

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