
In a significant move, the Indian government has approved a ₹10,000 crore fundraising plan for five public sector banks (PSBs). According to a report by CNBC-TV18, the fundraising will be carried out through the Qualified Institutional Placement (QIP) route.
Banks Involved in the Fundraising
The five banks selected for this initiative include:
- Bank of Maharashtra
- Indian Overseas Bank (IOB)
- Punjab & Sind Bank
- UCO Bank
- Central Bank of India
The fundraising is expected to begin in small tranches, starting from the fourth quarter of the financial year 2025 (Q4 FY2025).
Stake Sale via Offer for Sale (OFS) Route
In addition to the QIP, the Department of Investment and Public Asset Management (DIPAM) has been authorized to sell stakes in these banks through the Offer For Sale (OFS) route.
This step is part of the government’s strategy to meet the 25% minimum public shareholding norm for public sector banks by August 2026. These banks currently fall under the administrative control of the Department of Financial Services.
Government’s Current Ownership in the Banks
As of December 2024, the Indian government holds a majority stake in these five banks. The shareholding details are as follows:
- Bank of Maharashtra: 79.6%
- Punjab & Sind Bank: 98.25%
- Indian Overseas Bank (IOB): 96.38%
- UCO Bank: 95.39%
- Central Bank of India: 93.08%
These figures are based on the latest shareholding pattern available on the Bombay Stock Exchange (BSE).
Financial Impact
The government’s excess stake in these banks, based on current market prices, is estimated to be worth nearly ₹50,000 crore.
Objective
This dual fundraising strategy through QIP and OFS aims to:
- Infuse additional capital into these banks.
- Achieve compliance with public shareholding norms.
- Strengthen the financial stability of the public sector banking system.
The move underscores the government’s focus on boosting financial health and improving governance in public sector banks.
fundraising mode of QIP is last resort for the Govt. to make strengthen these five Banks.
Total 50000 crore a considerable funding.
In other words, it is bail out package. But the Govt. should take some other methods to infuse capital.like issung Bonds, Govt.securities, IPO, commercial paper, certificate of Deposits and many more.
A Qualified Institutional Placement (QIP) is a method publicly listed companies use to raise funds quickly and efficiently by selling shares or other securities directly to large investors known as Qualified Institutional Buyers (QIBs).