Shares of four PSU lenders rise on hopes of progress in minority stake sale plan

The plan under consideration is to sell the stake in PSU banks through an offer for sale in the open market, said Reuters.

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26 Aug, 2025 12:21

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Shares of four PSU lenders - Central Bank of India, Indian Overseas Bank, UCO Bank, and Punjab and Sind Bank - are sharply higher in early trade on November 19, after Reuters reported citing sources that the Centre is considering the proposal to sell minority stakes in order to comply with minimum public shareholding norms.

The Finance Ministry is likely to seek Cabinet approval in coming months, said the Reuters report, and the proposal is to sell PSU bank stake through the Offer For Sale route in the open market. Reuters quoted officials saying that the timing and the quantum of the stake sale would be decided based on market conditions.

Centre owns over 93% in Central Bank of India, 96.4% in Indian Overseas Bank, 95.4% in UCO Bank and 98.3% in Punjab and Sind Bank as September 30, as per shareholding data from BSE.

All listed companies - including PSUs - are required to maintain a minimum public shareholding of 25% as per the market regulator's Sebi's requirement. Out of 12 public sector banks, five are yet to comply with MPS norms and the government’s holding is beyond 75 per cent. The Centre has given an extension of two years till August 2026 for PSU banks to comply with the norms.

Insight from Prime Database in September showed that PSU banks like UCO Bank, Central Bank of India, Punjab National Bank, Indian Overseas Bank, Union Bank of India, and Bank of Maharashtra have firmed up plans to raise capital via the QIP route. The total size of these upcoming QIPs could be in excess of Rs 30,000 crore.

Deepak Jasani, Head of Retail Research at HDFC Securities told Moneycontrol that the shareholding reduction can be done in two ways. "Either the government comes out with an OFS or QIP. When a bank comes out with a QIP, it benefits because it enhances their capital and net worth... Depending on how the QIPs are received in the market, and whether the government needs funds, they might shift between different funding methods," he said.

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