Indian Overseas Bank, Punjab & Sind Bank and Central Bank of India Plan to Reduce Government Stake

Three public sector banks – Indian Overseas Bank (IOB), Punjab & Sind Bank and Central Bank of India – are working on plans to raise funds through sale of government shares. These proposed share issuances will help the state-owned banks reduce the government’s ownership.

Among the three banks, Indian Overseas Bank has indicated a tentative timeline for its proposed Qualified Institutional Placement (QIP), while Punjab & Sind Bank and Central Bank of India are yet to finalise the timelines for their respective fundraising plans.

Indian Overseas Bank Plans to Raise Rs 5,000 Crore

Indian Overseas Bank (IOB) has received approval to raise up to Rs 5,000 crore through a Qualified Institutional Placement (QIP) during the current financial year. The bank has also secured almost all the necessary regulatory and other clearances.

IOB Managing Director and CEO Ajay Kumar Srivastava told PTI that the bank is planning to launch the QIP towards the end of the current quarter or at the beginning of the fourth quarter, depending on market conditions.

If the bank raises the entire Rs 5,000 crore, its equity dilution is expected to be around 6 per cent. This would reduce the government’s shareholding in IOB from the existing 92.44 per cent to approximately 86 per cent.

Punjab & Sind Bank Also Exploring QIP

Punjab & Sind Bank is also exploring opportunities to raise capital through the Qualified Institutional Placement (QIP) route.

The bank has reportedly obtained the required approvals, appointed merchant bankers and held discussions with potential investors.

During an investor interaction following the announcement of its second-quarter results, Punjab & Sind Bank Managing Director and CEO Swarup Kumar Saha said the bank was exploring different options to raise capital, with QIP being its preferred route.

However, the timing of the proposed issue will depend on market conditions and feedback from its merchant bankers.

Central Bank of India Gets Approval to Raise Rs 7,000 Crore

Central Bank of India is another public sector lender planning to raise equity capital to strengthen its financial position and reduce the government’s shareholding.

In July, the bank received shareholders’ approval to raise up to Rs 7,000 crore through various routes, including a Qualified Institutional Placement (QIP), Follow-on Public Offer (FPO) and Rights Issue.

The bank is also considering reducing the government’s stake as part of its capital-raising strategy. However, the final route and timing of the fundraising will depend on its assessment of market conditions.

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How Will QIP Help Reduce Government Shareholding?

A Qualified Institutional Placement (QIP) allows a listed company to raise fresh capital by issuing new shares to qualified institutional buyers, such as mutual funds, insurance companies and other institutional investors.

When a public sector bank issues new shares through a QIP, the government’s existing shareholding gets diluted as the total number of outstanding shares increases. At the same time, public shareholding increases and the bank receives additional funds to support its business operations and growth.

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SEBI’s Minimum Public Shareholding Requirement

Under SEBI’s minimum public shareholding norms, listed companies are generally required to maintain at least 25 per cent public shareholding.

Several public sector banks have a high government ownership, making it necessary for them to gradually reduce the government’s stake to meet the regulatory requirements.

The proposed share issuances by Indian Overseas Bank, Punjab & Sind Bank and Central Bank of India are part of this broader effort. These fundraising activities will also help the lenders strengthen their capital base, support business expansion and improve their ability to meet future funding requirements.

With regulatory approvals and other preparatory steps already underway at some banks, the second half of FY27 could witness increased fundraising activity among public sector banks, subject to favourable market conditions and investor demand.

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