The finance ministry has asked five public sector banks to increase their minimum public shareholding to 25% by August 1, aligning with regulatory requirements. This move comes as part of the Securities Contract (Regulation) Rules, which mandate all listed companies, including public sector entities, to maintain a minimum public shareholding of 25%, according to reports.
Among the 12 public sector banks under scrutiny, five have yet to meet this requirement. These banks include UCO Bank, Central Bank of India, Punjab & Sind Bank, Bank of Maharashtra, and Indian Overseas Bank, with public shareholdings ranging from 1.75% to 13.54%.
Sources familiar with the matter suggest that the Securities and Exchange Board of India (SEBI) may consider granting exemptions to some public sector banks and other PSUs to gradually achieve compliance with the 25% minimum public shareholding norms by August 2024. State-run lenders are reportedly raising capital through Qualified Institutional Placement (QIP), leading to a dilution of the government’s stake. However, there are currently no plans for a direct share sale in any public sector bank.
The valuation
The five state-run banks have government stakes exceeding 75%, translating to unsold government stakes valued at over Rs 65,000 crore at current market prices. Additionally, several other government enterprises, including IRFC and SJVN, also have government stakes exceeding 75%.
In related developments, over the past year, the central government has divested its holdings in six public sector units (PSUs), including prominent names such as Hindustan Aeronautics Ltd., RVNL, SJVN, Coal India, HUDCO, and NHPC. Among these, the shares of four companies have already doubled from their Offer for Sale (OFS) floor price.
