A top government official has indicated that public sector banks are likely to receive an additional two-year extension to meet the Securities and Exchange Board of India’s (Sebi) minimum public shareholding (MPS) norms. Currently, out of 12 public sector banks (PSBs), five have yet to comply with the MPS requirement, with government holdings exceeding 75 percent.
Sebi’s MPS Requirements
Sebi mandates that all listed companies maintain a minimum public shareholding of 25 percent. In recognition of the unique circumstances faced by state-owned banks, the regulator has granted a special extension until August 2024 for these institutions to meet the 25 percent MPS requirement.
Request for Extension
Financial Services Secretary Vivek Joshi informed PTI that the government has formally requested an extension from the Department of Economic Affairs. Historically, such extensions are typically granted for two years, and it is anticipated that this will be approved soon.
Current Public Shareholdings
At present, five banks fall short of the 25 percent MPS requirement. For instance, the government holds 98.25 percent of Delhi-based Punjab & Sind Bank, 96.38 percent of Chennai-based Indian Overseas Bank, 95.39 percent of UCO Bank, 93.08 percent of Central Bank of India, and 86.46 percent of Bank of Maharashtra.
It is expected that the government’s stake in Bank of Maharashtra might drop below 75 percent within the current fiscal year.
Future Actions and Market Considerations
Joshi noted that decisions on share sales will depend on the banks’ capital needs and market conditions. Banks will evaluate whether to use Qualified Institutional Placement (QIP) or other methods to manage their shareholdings in the best interests of their shareholders.
Financial Sector Vision and Strategy Document
Regarding the financial sector vision and strategy document announced in the Budget, Joshi mentioned that it will be developed by the Department of Economic Affairs (DEA) and is expected to be released during the current fiscal year. This document will outline strategies for Vision 2047, including the number of banks needed for a developed Bharat and the future role of major global banks like SBI and ICICI Bank.
The strategy will also address the modernization of regulations and regulators, anticipating that banks will evolve beyond traditional roles to incorporate significant information technology functions. Work is ongoing on this document, and it is anticipated that it will be finalized by the end of the current financial year.
