The Centre is reportedly considering reducing its stake in four public-sector banks to 75 per cent over the next year to comply with the minimum public shareholding (MPS) requirement set by the Securities and Exchange Board of India (SEBI).
An exclusive report from ET suggested the government is also planning a consolidation strategy for the public sector banks, which will allow it to identify two banks for privatisation.
According to SEBI, a listed company in India is required to bring public shareholding to at least 10 per cent within two years from the data of listing and to atleast 25 per cent within five years.
The Centre currently holds more than a 75 per cent stake in four banks: Central Bank of India, UCO Bank, Punjab & Sind Bank and Indian Overseas Bank.
It still holds an 81.19 per cent stake in Central Bank of India, 90.95 per cent in UCO Bank, 93.85 per cent in Punjab & Sind Bank and 92.44 per cent in Indian Overseas Bank (IOB).
These banks are well past their listing dates but were exempted from the MPS norms till August 2026. As the regulatory countdown runs down, the government is quickly planning its sales. An official told ET that the Centre is expected to offload its stake through the Offer-for-Sale (OFS) route in the next year.
Regulatory compliance or minority disinvestment strategy?
While the move complies with regulatory requirements, the move might also offer the government some fiscal relief. With rising global energy costs, even minor disinvestments can open up a revenue route for the government.
The government’s long-term objective is to reportedly have three to four large state-owned banks. The consolidation exercise will also consider factors such as technology compatibility, geographical reach and business mix before merging.
NITI Aayog had reportedly shortlisted Central Bank of India and Indian Overseas Bank as potential candidates for privatisation.
The newspaper reported the development just as the Centre announced a proposed sale of its 30.48 per cent stake in IDBI Bank. Fairfax Financial Holdings, promoted by Canadian billionaire Prem Watsa, would acquire a 60.72 per cent stake in IDBI Bank for ₹52,878 crore, reducing the government’s stake to 15 per cent.
As per the latest data from the Department of Investment and Public Asset Management (DIPAM), the Indian government has raised ₹55,757 crore via disinvestments. The Centre is expected to exceed its disinvestment target of ₹80,000 crore when the IDBI deal is completed.
