Centre Plans To Cut Stakes In Four PSU Banks To 75% Over The Next Year To Meet SEBI's Minimum Public Shareholding Norms
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The Centre plans to reduce stakes in four PSU banks to 75% within a year, while exploring consolidation and potential privatisation. Read more about the proposed changes.
The Centre is considering a stake sale to reduce its shareholding in four public sector banks to 75% over the next year and meet the Securities and Exchange Board of India’s (SEBI) minimum public shareholding requirement.
The lenders under consideration are Central Bank of India, UCO Bank, Punjab & Sind Bank and Indian Overseas Bank, according to a report by The Economic Times.
The proposed stake sales could increase the shares available to public investors and potentially improve the banks’ market valuations. The government may sell part of its holdings through an offer for sale (OFS), depending on market conditions. The banks may also raise funds independently through the stock market.
PSU Bank Stake Dilution Plan: Key Details To Know
According to figures cited in the report, the government holds 92.44% in Indian Overseas Bank, 81.19% in Central Bank of India, 90.95% in UCO Bank and 93.85% in Punjab & Sind Bank.
Reducing its stake to 75% would require the Centre to sell shares in all four lenders, with the extent of dilution varying across banks. Punjab & Sind Bank, Indian Overseas Bank and UCO Bank would require larger stake reductions than the Central Bank of India.
The government had exempted state-owned companies, including financial institutions, from meeting the minimum public shareholding requirement of 25% until August 2026. A further extension is expected, according to the report.
Can Any Other PSU Banks Be Privatised?
Alongside the proposed stake sales, the government is preparing for another round of public sector bank consolidation. The long-term aim is to maintain three or four large state-owned banks, with technology compatibility, geographical reach and business mix among the factors being considered.
NITI Aayog has reportedly shortlisted Central Bank of India and Indian Overseas Bank as potential candidates for privatisation. The Central Bank of India privatisation proposal remains under consideration, and no final decision on the lender’s sale has been reported.
Privatisation would require legislative changes, including amendments to the Banking Companies (Acquisition and Transfer of Undertakings) Act. These changes could be pursued alongside the consolidation exercise.
The latest developments follow the government’s announcement earlier this month that Fairfax Financial Holdings would acquire a 60.72% stake in IDBI Bank for ₹52,878 crore. The proposed sales in the four public sector banks are primarily aimed at increasing public shareholding and do not, by themselves, signal a decision to privatise them.
This article is for informational purposes only and should not be considered investment advice from Kotak Neo. For compliance T&C and disclaimers, Visit www.kotakneo.com/disclaimer
Vishwa has spent 10+ years across fintech and FMCG doing what most people miss, connecting the dots, catching trends before they trend, and finding the angle nobody else thought to ask about.
At Kotak Neo, she drives content strategy for neoshorts, Kotak News Desk, and Investing Guide, turning market noise into something worth reading.
When she's not decoding markets, she trades charts for canvases, chasing art, painting, and architecture across cities she's yet to explore.
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