NEW DELHI: The Central Government is considering reducing its stake in four major public sector banks to 75 per cent over next year. The move is aimed at meeting the ‘minimum public shareholding’ requirement set by stock market regulator, Sebi, which mandates that at least 25 per cent equity in any company listed on stock exchanges must be held by the public. All four of these public sector banks are listed on NSE and BSE. Through this initiative, 25 per cent of the shares in these banks will be made available to retail investors and other shareholders.
According to media reports which cite sources familiar with the matter, the Government is also working on a plan for the next phase of consolidation (merger) of public sector banks, alongside the proposal to divest its stake.
The Government’s objective is to merge smaller and weaker public sector banks into larger, more robust, and financially stronger institutions—much like the previous consolidation where Punjab National Bank (PNB), Oriental Bank of Commerce, and United Bank of India were merged.
The Government’s objective is to merge smaller and weaker public sector banks into larger, more robust, and financially stronger institutions—much like the previous consolidation where Punjab National Bank (PNB), Oriental Bank of Commerce, and United Bank of India were merged.
As part of this process, two additional banks may be identified for privatisation. This means that banks not selected for mergers could be sold to large private-sector entities. Privatisation is expected to improve operational efficiency, enhance corporate governance, and facilitate the adoption of modern technology. According to reports, NITI Aayog had previously shortlisted Central Bank of India and Indian Overseas Bank for privatisation.
Which public sector banks will see a reduction in Government stake?
1. Indian Overseas Bank – The Government’s stake in this bank is approximately 92.44 per cent.
2. Punjab & Sind Bank – The Government holds a 93.85 per cent stake in this bank.
3. Uco Bank – The Government’s stake in this bank is 90.95 per cent.
4. Central Bank of India – The Government’s stake in this bank is 81.19 per cent.
Deal regarding IDBI Bank
Recently, the Government approved the sale of a 60.72 per cent stake in IDBI Bank. This stake will be acquired from the Government for Rs 52,878 crore — at a price of Rs 81 per share — by a subsidiary of the Canadian firm Fairfax Financial Holdings. Of this 60.72 per cent stake, 30.48 per cent is held by the Government of India, and 30.24 per cent is held by the Life Insurance Corporation (LIC). Even after this disinvestment, the Government will retain a 15 per cent stake and LIC will retain a 19 per cent stake in the bank. In other words, together, they will continue to hold a combined stake of 34 per cent in the bank.
