Seven listed PSBs may fail to increase public float to 25% by August, FinMin to seek extension from SEBI
The government continued to hold over 75 percent stake in seven listed PSBs as at the end of March.
The Finance Ministry might seek an extension from the Securities and Exchange Board of India (SEBI) for seven public sector banks (PSBs) to increase their public float to 25 percent. These banks are likely to miss the stipulated August deadline.
As per norms, listed public sector units should not have more than 75 percent government stake by August 2017. However, as at the end of March the government held more than 75 percent in public banks such as United Bank of India, Indian Bank, Bank of Maharashtra, Central Bank of India, Punjab and Sind Bank, Indian Overseas Bank and UCO Bank. In some banks such as United Bank, the stake is nearly 85.23 percent.
The government had stipulated the 25-percent minimum public shareholding norm in listed state-run companies in 2014, to promote a wider investor base, and boost the government’s plan to raise funds from disinvestment.
This was a move from the mandate where PSUs were to have at least a 10 percent public holding, and listed non-PSUs were asked in June 2010 to have at least a 25 percent public shareholding within three years.
The Financial Express reported a senior government official as saying that post-merger government’s shareholdings in the larger entities may change, and while efforts are being made to comply with the SEBI norms, a delay cannot be ruled out as consolidation is a time-consuming process.
The government has also announced a Rs 10,000-crore capital infusion in some of these PSBs in 2017-18, following which the government’s shareholding in these banks could rise further. Even shareholdings in some of the other banks, which are already close to 75 percent (in Bank of India, for instance, the government’s shareholding is as high as 73.72 percent)
The government held as much as 85.23 percent in United Bank and 76.67 percent in UCO Bank as of end-March.
If implemented, the merger could alter the government’s shareholding pattern in future in some of the PSBs and breach the ceiling after receiving capital infusion again in the current fiscal.Apart from a public offer, the government has been contemplating other options, including selling stakes to institutions like Life Insurance Corporation, to bring down its shareholding.