Five Government Banks May Miss Deadline to Meet Public Shareholding Rules Despite 2-Year Extension

Five state-owned banks, including UCO Bank, Central Bank of India, Punjab and Sind Bank, Bank of Maharashtra, and Indian Overseas Bank, may need more time to meet the required public shareholding levels set by SEBI, despite getting a two-year extension.

The deadline for these banks to increase public ownership to 25% has been extended to July 31, 2026. However, they might still need at least three more years to reach this goal because most of them have over 90% government ownership. Reducing this stake to 75% will take time and has to be done gradually.

One way the government plans to reduce its stake is through Qualified Institutional Placements (QIPs), where shares are sold to institutional investors. The first round of QIPs could happen in the second half of the fiscal year 2025, depending on market conditions. The amount of shares sold could be between 5% and 10% of the bank’s equity.

Currently, public shareholding in these banks ranges from 1.75% to 13.54%. The government wants these banks to raise money from the market based on their stronger financial positions, rather than relying on government funds.

However, selling large amounts of shares all at once might overwhelm the market, so it will have to be done gradually. The total value of government shares that need to be sold is estimated to be around ₹60,000 crore to ₹65,000 crore.

The same approach may be used for other public companies like Life Insurance Corporation (LIC), which has also been given more time to increase public shareholding to 10% by May 2027.