Government to divest 5-10% stake in Public Sector Banks: Report

Government Divestment Plan: The government is planning divestment of 5-10% stake in Public sector lenders in which it holds over 80% equity, reported Economic Times.

Government Ownership in PSU Banks

Government has over 80% ownership in six state-run banks including Bank of India, Indian Overseas Bank, Punjab & Sind Bank, Bank of Maharashtra, Central Bank of India and Uco Bank. As per Economic Times, a detailed roadmap is expected to be made soon as the government is looking to take advantage of the sharp rally in share prices of public sector banks (PSBs) that are riding on much-improved financial performance and fundamentals.

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"Banks will be submitting their capital-raising plans, and based on those assessments, a roadmap may be drawn up for each lender," an official told Economic Times, adding that the timing of these issues will depend on market conditions and could spill over to the next fiscal year.

Stake Sale

The report further mentioned that the stake sale can be conducted through the offer-for-sale route for lenders that are not inclined toward a rights issue. A follow-on public offer can also be explored in case banks need capital. By this, the government will divest some stake and the lender will issue fresh equity in the same proportion.

If the government sells 10% stake of the Bank of India, it could raise close to Rs 4,400 crore at current market value.

Meanwhile, Economic Times also reported that offloading 5-10% stake will not affect the privatisation plans of two state-run banks. The privatisation plans will continue in parallel and the government is also looking to exit from IDBI Bank