After IDBI, Centre weighs stake cuts in 4 PSU banks
What's the story
The Indian government is mulling over reducing its stakes in four public sector banks (PSBs) to meet public shareholding norms. The banks under consideration are Central Bank of India, UCO Bank, Punjab & Sind Bank, and Indian Overseas Bank. The move comes after Fairfax Financial Holdings, promoted by Canadian billionaire Prem Watsa, is set to acquire a 60.72% stake in IDBI Bank for ₹52,878 crore.
Stake reduction
Stake sales through OFS likely
The government's immediate focus is on raising public shareholding in these four banks over the next year.
The Centre may opt for stake sales through offers for sale (OFS), depending on market conditions.
Meanwhile, individual banks can also raise capital from the market based on their specific needs and strategies.
This move is expected to improve the valuations of these lenders by increasing their public float.
Future plans
Two banks identified for privatization
The government is also gearing up for another round of consolidation among state-owned lenders, which could see two banks identified for privatization.
NITI Aayog had reportedly shortlisted Central Bank of India and Indian Overseas Bank as potential candidates for this process.
The long-term goal is to have three or four large state-owned banks in the country.
Legal changes
Legislative amendments needed for privatization
To go ahead with privatization, the government will need to make legislative amendments, including changes to the Banking Companies (Acquisition and Transfer of Undertakings) Act.
These changes could be pursued along with the consolidation exercise.
The government had previously exempted state-owned companies, including financial institutions, from the minimum public shareholding requirement of 25% till August 2026. A further extension is likely to be notified soon.