Govt Considering Selling Off 5–10% Of Its Holdings In Public Sector Banks

Six state-run banks—Bank of India, Indian Overseas Bank, Punjab & Sind Bank, Bank of Maharashtra, Central Bank of India, and Uco Bank—have more than 80 per cent of their equity owned by the government

Outlook Business Desk

Updated on: 14 November 2023 2:49 pm

Finance Minister Nirmala Sitharaman

The Union government, which presently owns over 80 per cent of public sector banks, is thinking about selling off 5–10 per cent of its holdings.

A comprehensive plan is anticipated to be finalised shortly, according to individuals with relevant knowledge. Six state-run banks—Bank of India, Indian Overseas Bank, Punjab & Sind Bank, Bank of Maharashtra, Central Bank of India, and Uco Bank—have more than 80 per cent of their equity owned by the government, according to a story by ET.

The public sector banks' (PSBs) recent substantial price increase is being eagerly seized by the government, which benefits from significantly improved financial performance and fundamentals.

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According to those with knowledge of the discussions, lenders who are not inclined towards a rights issue can carry out the share sale through the offer-for-sale process. A follow-on public offer, in which the lender issues new equity in an equal amount and the government divests some stake, is a possibility if banks require additional capital.

"Banks will be submitting their capital-raising plans, and based on those assessments, a roadmap may be drawn up for each lender," an official told ET.

The Nifty PSU Bank index yielded 34 per cent during the course of the previous year, while the Nifty Private Bank Index increased by 6.9 per cent. During this time, the benchmark Nifty 50 was up 6.4 per cent. Monday saw a 2.64 per cent increase in the Nifty PSU Bank index and a 0.42 per cent decrease in the Nifty 50, with the latter closing at 19,443.55.

Another official stated that the privatization plans for the two state-run banks involved in this exercise will proceed simultaneously and will not be affected by these minor share sales. "The privatisation plan for two PSBs can still be pursued if the government holding comes down by 5-10 (percentage points). There is no conflict between the two," another official told ET.

Additionally, the government wants to leave IDBI Bank, which is currently regarded as a lender in the private sector.