Public sector banks asked to reduce govt stake to 52%

New Delhi, January 14

In a bid to align with the best corporate practices, the Finance Ministry has asked the public sector banks to gradually bring down the government’s equity to 52%, a top official said.

“The government is essentially a major shareholder. So, this need to be aligned to the best corporate practices. The shareholding needs to come down to at least 52% in the first phase. As and when market condition allows, banks will take step in that direction. They have all the permission in hand,” Financial Services Secretary Rajiv Kumar said.

Dilution of government stake will help banks to meet 25% public float norms of market regulator SEBI. Some of the public sector banks have government’s holding beyond 75%.

Besides, it will encourage the banks to follow the prudential lending norms.

The country’s largest lender State Bank of India (SBI) has already initiated step for Rs 20,000-crore share sale through qualified institutional placement (QIP). Post QIP, the government stake will be diluted from the existing 58.53%.

Last month, shareholders of the bank approved sale of shares to fund the business growth. Many other banks are planning to raise capital through some means or other, depending on the market condition.

Some of the lenders like Syndicate Bank, Union Bank of India, PNB, and Oriental Bank of Commerce among others have already issued or in process of issuing Employee Share Purchase Scheme. — PTI

SEBI GUIDELINES 

• Dilution of government stake will help banks to meet 25% public float norms of SEBI

• Some of the public sector banks have government’s holding beyond 75%

• Besides, it will encourage the banks to follow prudential lending norms