Government Plans to Sell Stake in Five Public Sector Banks by FY27

The central government is preparing to sell a small portion of its ownership in five public sector banks through the Offer for Sale (OFS) method in the financial year 2026–27 (FY27), according to a senior official.

The five banks identified for this stake sale are:

• Bank of Maharashtra
• Indian Overseas Bank (IOB)
• UCO Bank
• Central Bank of India
• Punjab and Sind Bank

What is OFS?

The Offer for Sale (OFS) is a method used by the government to sell its shares in a company. Unlike earlier methods like Qualified Institutional Placements (QIPs)—where money raised goes directly to the bank to strengthen its capital—OFS reduces the government’s ownership, and the money earned goes to the government treasury.

So far, the government has not used OFS for public sector banks (PSBs), making this a new and notable step.

Why Now?

Currently, the government’s disinvestment schedule for this year is already full with plans for other public sector companies. That’s why the stake sale in these five banks is being postponed to FY27.

Additionally, there are no plans for strategic disinvestment—which would involve selling a larger portion to private players or changing management control—at this time. Such a move would require a formal proposal and approval from the Union Cabinet, which hasn’t been initiated yet.

Preparations Underway

The Department of Investment and Public Asset Management (DIPAM) has already started making preparations:

• It has launched the empanelment process to select merchant bankers and transaction advisors, who will help with the stake sale.
• These advisors are being shortlisted under two categories:
  • Category A for deals under Rs 2,000 crore
  • Category A+ for larger transactions above Rs 2,000 crore

What’s Next?

Government officials are carefully watching the stock prices and market conditions of the five banks to decide when and how to conduct the OFS. They are analyzing both internal factors (like the bank’s financial health) and external ones (like market trends and economic conditions) to make the right decisions.

Current Government Holdings in the Banks

As of now, the government holds the following shares in each of the five banks:

• Bank of Maharashtra – 86.46%
• Indian Overseas Bank (IOB) – 96.38%
• UCO Bank – 95.39%
• Central Bank of India – 93.08%
• Punjab and Sind Bank – 98.25%

This move comes as investor interest in public sector banks is growing, especially after developments related to IDBI Bank’s strategic sale.

While there are no immediate plans for full privatization or strategic disinvestment, the government is looking to start reducing its stake in public sector banks gradually, starting with an OFS in FY27.