Why government banks have to list subsidiaries on stock exchanges
What's the story
The Ministry of Finance has urged public sector banks (PSBs) to consider monetizing their investments in subsidiaries by listing them on stock exchanges. The move is aimed at helping these banks realize good returns after scaling up their operations. As many as 15 PSB subsidiaries or joint ventures are being considered for initial public offerings (IPOs) or divestment in the medium to long term, as per PTI.
Operational scaling
Banks advised to invest funds to scale up operations
The Finance Ministry has also advised banks to invest funds, wherever required, to scale up the operations of their subsidiaries or joint ventures. This is seen as a strategic move by banks to unlock value at an opportune time. However, before monetization can take place, there is a need for improved governance and professional decision-making within these entities.
Future prospects
SBI likely to consider listing SBI General Insurance
The country's largest lender, State Bank of India (SBI), is likely to consider listing SBI General Insurance and SBI Payment Services in the future. This will happen after these entities have scaled up their operations. SBI General Insurance Company Ltd posted a profit of ₹509 crore for the fiscal year ending March 2025. The company has also allotted equity shares during this period, reducing SBI's stake slightly from 69.11% to 68.99%.
Listing initiatives
Canara Bank has already started the process of listing
SBI Payment Services Pvt Ltd, which operates in the merchant acquiring business, is 74% owned by SBI and the rest by Hitachi Payment Services. Meanwhile, Canara Bank has already started the process of listing its asset management JV, Canara Robeco AMC. The bank is also planning to list its life insurance JV with HSBC Holdings, called Canara HSBC Life Insurance Company.