SYNOPSIS: Four PSU banks with over 90 percent government ownership will raise capital this year to meet SEBI’s minimum public shareholding norm, enabling compliance and expanding lending without reducing majority government control.
On 17th September, M Nagaraju, Secretary of the Department of Financial Services (DFS), stated that four state-owned banks will be raising capital this year to ensure compliance with the Securities and Exchange Board of India’s (SEBI) minimum public shareholding (MPS) requirement.
As per SEBI regulations, every listed company must maintain at least 25 percent of its shareholding with public investors. However, the government’s stake in these four PSU banks, including Indian Overseas Bank and UCO Bank, is significantly higher than the prescribed threshold, necessitating a reduction in government ownership by issuing additional shares to the public.
Among the 12 PSBs, these four banks had government holdings close to or exceeding 90 percent as of June 2025. Recently, each of these banks raised between Rs. 1,500 crore and Rs. 2,000 crore through qualified institutional placements (QIPs), resulting in only a marginal reduction in the government’s shareholding.
M Nagaraju further stated that the government plans to raise capital for four public sector banks this year. The move aims to ensure compliance with SEBI’s guideline requiring public shareholding to be at least 25 percent. He explained that this capital raising would enable the banks to expand their lending capacity once the funds are secured.
He further noted that credit growth has been exceptionally strong, driven by last year’s robust profits. Given the current low inflation and ample liquidity in the system, the government is confident about increasing lending, and it seeks to communicate this positive outlook to the nation.
Nagaraju also clarified that there is no proposal under consideration to reduce the Centre’s stake in PSBs below 51 percent. He emphasised that these banks will remain majority government-owned, as it is in the public interest for the government to retain significant control over them. Following four PSU bank stocks are in focus that will be raising capital this year to be compliant with the SEBI’s minimum public shareholding norm:
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1. Indian Overseas Bank
With a market cap of Rs. 78,162.5 crores, the stock moved up by around 3.3 percent on BSE, rising to Rs. 38.15 on Wednesday. As of June 2025, Indian Overseas Bank has a government shareholding of 94.61 percent and a public shareholding of just 2.94 percent.
2. Punjab & Sind Bank
With a market cap of Rs. 21,464 crores, the stock moved up by around 2 percent on BSE, rising to Rs. 30.4 on Wednesday. As of June 2025, the bank has a government shareholding of 93.85 percent and a public shareholding of only 1.82 percent.
3. UCO Bank
With a market cap of Rs. 38,233 crores, the stock moved up by around 3 percent on BSE, rising to Rs. 30.82 on Wednesday. As of June 2025, the bank has a government shareholding of 90.95 percent and a public shareholding of 4.17 percent.
4. Central Bank of India
With a market cap of Rs. 34,250.5 crores, the stock moved up by around 3.3 percent on BSE, rising to Rs. 38.15 on Wednesday. As of June 2025, the bank has a government shareholding of 89.27 percent and a public shareholding of 4.7 percent.
Written by Shivani Singh
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