
The Central Bank of India, a government-owned bank, wants to sell some of its shares to the public through a method called “Offer for Sale” (OFS). They prefer this over getting new money through methods like Qualified Institutional Placement (QIP) or a rights issue. The idea is to avoid reducing the bank’s ownership while making more of its shares available to the public. Currently, the government owns a bit more than 93% of the bank.
What this means?
OFS stands for “Offer for Sale.” It is a method used by companies, including banks, to sell their shares to the public. In an OFS, existing shareholders, such as the government in the case of a public-sector bank, sell their shares to the public through the stock exchange. This is different from a fresh issue of shares, where new shares are created and sold to raise capital.
In the context of the Central Bank of India’s proposal for an OFS, it means that the bank is suggesting the government sell some of its existing shares to the public, as opposed to issuing new shares or diluting its ownership through other methods like Qualified Institutional Placement (QIP) or a rights issue. The goal of an OFS is often to increase the public float of shares without affecting the overall ownership structure.
What Bank’s CEO said?
The bank’s CEO, M V Rao, is confident about this plan. He says the bank is financially strong, and there’s no need to dilute its ownership further. The bank’s financial health looks good, and it doesn’t need to go to the market for more money right now.
Rao explains that instead of immediately reducing the government’s ownership, they want to increase the number of bank shares available to the public. This way, they can improve the availability of the bank’s shares in the market without reducing the earnings for each share. The bank’s stock price went up by 2.95% to Rs 56.21 per share on the Bombay Stock Exchange (BSE).
The bank’s CEO also mentioned that they received financial support from the government in the past few years, improving their financial position. The government provided funds in 2018, 2019, 2020, and 2021, totaling Rs 19,903 crore, which helped the bank become more financially stable.