Govt Mulls Stake Sale In 4 PSU Banks To Meet 25% Public Shareholding Norm

The Central Government is considering reducing its stake in four public sector banks to 75% as part of efforts to meet minimum public shareholding requirements, as per a report by the Economic Times.

The banks under consideration are Central Bank of India, UCO Bank, Punjab & Sind Bank and Indian Overseas Bank.

The Centre is also exploring another round of consolidation among state-owned lenders, alongside plans to identify two banks for possible privatisation.

According to the report, the government's immediate focus is on increasing public ownership in the four lenders over the next year.

Banks could raise funds independently through market offerings, while the Centre may consider offers for sale to reduce its holdings, depending on market conditions.

The proposed move would help the lenders comply with the 25% minimum public shareholding requirement.

A larger public float could also improve market liquidity and support valuations, the report said.

The government had exempted state-owned companies, including financial institutions, from these requirements until August 2026.

A further extension is expected to be notified.

Privatisation Plans Gain Attention

The Centre's longer-term objective is to create three to four large state-owned banks, according to The Economic Times.

NITI Aayog had reportedly identified Central Bank of India and Indian Overseas Bank as potential privatisation candidates.

In the 2021-22 Union Budget, the government announced plans to privatise two public sector banks and one general insurance company, apart from IDBI Bank.

Earlier this month, the government announced that Prem Watsa-backed Fairfax Financial Holdings would acquire a 60.72% stake in IDBI Bank for ₹52,878 crore.

Officials cited in the report said future mergers would consider technological compatibility, geographical coverage and business portfolios.

Banks are also expected to provide suggestions on the proposed consolidation exercise.

Privatisation would require legislative amendments, including changes to the Banking Companies (Acquisition and Transfer of Undertakings) Act.

The report added that the government considered IDBI Bank's volatile share price an unreliable indicator of its intrinsic enterprise value because of limited trading activity.