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Informist, Tuesday, Nov. 19, 2024

 

NEW DELHI – The government may help four public-sector banks meet the Securities and Exchange Board of India's minimum public shareholding norm of 25% by offloading some of its stake in the banks through the offer-for-sale route, a senior finance ministry official said Tuesday. Though five banks--Punjab & Sind Bank, Indian Overseas Bank, UCO Bank, Central Bank of India, and Bank of Maharashtra--do not comply with the norm currently, the government may sell stakes in the first four only, the official said.

 

Some of the banks have announced or already started raising capital through the qualified institutional placement route to lower the government's stake. "Just going through the QIP route may not be enough for the four banks to lower the government stake as it is huge," the official told Informist. "Besides, the banks may not know what to do with that much huge capital.... and so, a minority stake sale is a very natural consequence."

 

As of September end, the government had 98.25% stake in Punjab & Sind Bank, 96.38% in Indian Overseas Bank, 95.39% in UCO Bank, 93.08% in Central Bank of India, and 79.60% in Bank of Maharashtra.

 

The finance ministry has asked the five public-sector banks to increase the minimum public shareholding to 25% by Aug. 1, 2026. This is in line with the Securities Contract (Regulation) Rules issued by SEBI, which mandates that all listed companies, including public-sector ones, must have a minimum public shareholding of 25%.

 

If the government decides to sell stakes in these banks, it will have to seek the Union Cabinet's nod. The official said the government was still firming up details of the plan and so a timeline as to when a Cabinet nod would be sought cannot be given just yet. "The timing will have to also take into account how the market is moving at that time," the official added.

 

Among the five banks that do not comply with the minimum public shareholding norm, Bank of Maharashtra raised INR 35 billion through a qualified institutional placement in October to lower the government's stake. UCO Bank is also in the process of raising INR 15-20 billion via QIP to lower the government's stake in it by 2-3%.  End

 

Reported by Priyasmita Dutta

Edited by Rajeev Pai

 

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