Finance Ministry asks 5 PSU Banks to decrease Govt shareholding by 1st August

The Finance Ministry has instructed five public sector banks in India to increase their minimum public shareholding to 25% by August 1, in line with regulatory requirements. This directive is part of the Securities Contract (Regulation) Rules, which mandate all listed companies, including public sector entities, to maintain a minimum public shareholding of 25%.

The five public sector banks that have yet to meet this requirement are UCO Bank, Central Bank of India, Punjab & Sind Bank, Bank of Maharashtra, and Indian Overseas Bank. These banks currently have public shareholdings ranging from 1.75% to 13.54%.

Read More - Shareholding Pattern of Government in Public Sector Banks

Nationalized Banks (Government Shareholding %, as at end-March 2023)

1. State Bank of India (57.59%)

2. Canara Bank (62.93%)

3. Bank of Baroda (63.97%)

4. Punjab National Bank (73.15%)

5. Indian Bank (79.86%)

6. Bank of India (81.41%)

7. Union Bank of India (76.99%)

8. Bank of Maharashtra (90.90%)

9. Central Bank of India (93.08%)

10. UCO Bank (95.39%)

11. Indian Overseas Bank (96.38%)

12. Punjab and Sind Bank (98.25%)

Sources familiar with the matter suggest that the Securities and Exchange Board of India (SEBI) may consider granting exemptions to some public sector banks and other public sector undertakings (PSUs) to gradually achieve compliance with the 25% minimum public shareholding norms by August 2024. State-run lenders are reportedly raising capital through Qualified Institutional Placement (QIP), which leads to a dilution of the government’s stake. However, there are currently no plans for a direct share sale in any public sector bank.

It is worth noting that the government’s stake in the five state-run banks exceeds 75%, resulting in unsold government stakes valued at over Rs 65,000 crore at current market prices. Additionally, several other government enterprises, including IRFC and SJVN, also have government stakes exceeding 75%.

In related developments, the central government has divested its holdings in six public sector units (PSUs) over the past year. These include Hindustan Aeronautics Ltd., RVNL, SJVN, Coal India, HUDCO, and NHPC. The shares of four of these companies have already doubled from their Offer for Sale (OFS) floor price.

It is important to note that the Finance Ministry has recently amended the Securities Contracts (Regulation) Rules, 1957 to exempt listed public sector companies from the minimum public shareholding norm. This exemption comes ahead of the three-year timeframe given to listed PSUs to conform to the norm. The amendment allows listed entities to have at least 25% public shareholding, which can be held by anyone other than a promoter, including institutions or individuals.

These recent developments highlight the government’s efforts to ensure compliance with minimum public shareholding requirements and promote transparency in the functioning of listed companies in India.

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Shareholding Pattern of Government in Public Sector Banks

The Indian government holds just a 57.6% stake in the country's largest lender State Bank of India (SBI), and the highest 98.25% stake in Punjab & Sind Bank as of March 2022, the Rajya Sabha was informed. Ten years ago, the government's stake in SBI was 61.58%, which has come down to 57.59% as of March 2023.

 

Responding to a question on the privatisation of public sector banks (PSBs), Dr Bhagwat Karad, minister of state for finance, says the policy for privatisation of two PSBs was announced in the Union Budget for FY23. "...the objectives of the policy include enablement of growth of public sector enterprises through infusion of private capital, thereby contributing to economic growth and new jobs, and financing of social sector and development programmes of the government."

 

Priyanka Chaturvedi, a member of Parliament (MP), has asked whether the Union government has any plans to dilute its share in PSBs. 

 

While sharing the shareholding pattern of PSBs, Dr Karad clarified that "banks raise equity capital from the market through qualified institutional placements and other routes, which results in dilution of the percentage shareholding of the government of India."

Sr. No.	Name of the Bank	% age of Shareholding
1	Bank of Baroda	63.97
2	Bank of India	81.41
3	Bank of Maharashtra	90.97
4	Canara Bank	62.93
5	Central Bank of India	93.08
6	Indian Bank	79.86
7	Indian Overseas Bank	96.38
8	Punjab National Bank	73.15
9	Punjab & Sind Bank	98.25
10	State Bank Of India	57.59
11	Uco Bank	95.39
12	Union Bank of India	83.49

                                                              AS ON 31.03.2023
According to the data shared by the minister of state, out of the 12 PSBs, the government's stake in five banks remains above 90%. This includes Bank of Maharashtra (90.97%), Central Bank of India (93.08%), Indian Overseas Bank (96.38%), Punjab & Sind Bank (98.25%) and UCO Bank (95.39%). 
The Union government, through the President of India, owns an 83.49% stake in Union Bank of India, 81.41% stake in Bank of India, 79.86% stake in Indian Bank, 73.15% in Punjab National Bank, 63.97% in Bank of Baroda and 62.93% in Canara Bank. 

Ultimately, among the PSBs, SBI, has the highest stake (42.41%) from institutional investors and public shareholders. As of March 2023, the public shareholding, including institutional investors, in SBI was 35.89%, data from BSE shows.

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This company picks up 4% stake in Bank of India via open market transaction

 

State-owned Bank of India on Friday said LIC has picked up nearly 4 per cent equity shares of the bank through an open market transaction a day earlier.

LIC has picked up nearly 3.9 per cent (15,90,07,791 shares) of the bank through open market acquisition on September 2, 2021, Bank of India said in a regulatory filing.

Before the latest acquisition of shares in the bank, LIC held over a 3.17 per cent stake in the state-owned bank. The bank said that LIC's stake in Bank of India has now increased to 7.05 per cent, equivalent to 28,92,87,324 shares

As per Sebi regulations on substantial acquisition of shares and takeovers, companies have to inform the stock exchanges when an entity holds more than 5 per cent shares in a listed company.

Last week, the bank closed its QIP in which it raised Rs 2,550 crore by allotting preference shares to qualified institutional buyers (QIBs).

In the qualified institutional placement (QIP), which closed on August 30, LIC picked up the biggest chunk by acquiring nearly 39.22 per cent (15,90,07,791 shares) of the equity shares offered in the issue. Through this QIP, the government shareholding in the bank came down to 82.50 per cent from 90.34 per cent earlier.

Apart from using the equity capital to fund business growth, the bank also has to bring down the government's shareholding in the bank. Thus, it is aiming to reduce the government holding by selling the equity.

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Share swap ratio of PSU bank after mega merger

ICICI Securities (I-Sec) on Tuesday estimated that Syndicate Bank shareholders would get 140 shares of Canara Bank for every 1,000 shares of Syndicate Bank, while Allahabad Bank shareholders would get 176 shares of Indian Bank for every 1,000 shares of Allahabad Bank.

As per estimation that while Oriental bank of Commerce (OBC) shareholders would get 1130 shares of Punjab National Bank(PNB) for every 1000 shares of OBC.United Bank of India shareholders would get 160 shares of Punjab National Bank(PNB) for every 1000 shares of United Bank of India,as a part of merger swap ratios.

Similarly Andhra bank shareholders would get 330 shares of Union Bank of India for every 1000 shares of Andhra Bank.Corporation Bank shareholders would get 320 shares of Union Bank of India for every 1000 shares of Corporation Bank.

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