Government plans to dilute stakes in four state-run banks - Complete details inside

The government is considering an offer for sale (OFS) to offload its stake in these banks.

The Central government is exploring the sale of minority stakes in four state-owned banks—Central Bank of India, Indian Overseas Bank, UCO Bank, and Punjab and Sind Bank. The move aims to comply with public shareholding norms set by the Securities and Exchange Board of India (SEBI), according to sources familiar with the matter.

Cabinet Approval Likely Soon
The finance ministry is expected to seek cabinet approval in the coming months to proceed with stake dilution. Currently, the government holds more than 93 per cent stake in the Central Bank of India, 96.4 per cent in the Indian Overseas Bank, 95.4 per cent in UCO Bank, and 98.3 per cent in Punjab and Sind Bank, as per the Bombay Stock Exchange (BSE) data for September-end.

Stake Sale via Open Market Offer
The proposed plan involves selling these stakes through an Offer for Sale (OFS) in the open market. The timing and extent of the sale will depend on market conditions, according to an official who chose to remain unnamed.

Public Shareholding Deadline and SEBI Exemptions
SEBI mandates a minimum of 25 per cent public shareholding for listed companies. However, government-owned firms are exempt from this requirement until August 2026. The source did not comment on whether the government will meet the deadline or seek an extension.

Impact on Stock Prices
Following the news, shares of the four banks rose between 3 per cent and 4 per cent, reflecting market optimism about the potential stake sale.

Previous Stake Dilution Efforts by Public Sector Banks
Public sector banks have historically relied on Qualified Institutional Placements (QIP) to raise capital and reduce government stakes. For instance:

• Punjab National Bank raised Rs 5,000 crore through a QIP in September 2024.
• Bank of Maharashtra followed with Rs 3,500 crore in October 2024.

The finance ministry has yet to issue an official statement on the matter.

Disclaimer: The article is for informational purposes only and not investment advice.