Government Divests 5%-10% of PSUs


With over 80% stock in public sector lenders, the government is thinking of selling off 5–10% of those holdings. Those with knowledge of the situation say that a comprehensive roadmap is anticipated to be finalised soon. The government owns more than 80% of six state-run banks: Bank of India, Indian Overseas Bank, Punjab & Sind Bank, Bank of Maharashtra, Central Bank of India, and Uco Bank.

The government, which gains from much stronger financial performance and fundamentals, is keen to seize the public sector banks' (PSBs) recent considerable price increase. 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.

The timing of these issues will depend on market conditions and may extend into the next fiscal year. "Banks will be submitting their capital-raising plans, and based on those assessments, a roadmap may be drawn up for each lender," the source stated.

The Nifty PSU Bank index yielded 34% during the course of the previous year, while the Nifty Private Bank Index increased by 6.9%. During this time, the benchmark Nifty 50 was up 6.4%. Monday saw a 2.64% increase in the Nifty PSU Bank index and a 0.42% decrease in the Nifty 50, with the latter closing at 19,443.55. The largest of the six, the Bank of India, can garner around Rs 4,400 crore at current market value for a 10% stake sale. The bank is 81.4% owned by the government