Centre Plans to Reduce Stakes in Four PSU Banks to 75% to Meet Market Norms

The central government is reportedly considering reducing its shareholding in four public sector banks to 75% over the next year. The proposed move is designed to meet the stock market regulator's minimum public shareholding requirements, while officials concurrently evaluate broader strategies for future bank consolidation and potential privatisation.

Scope of the Proposed Stake Dilution

According to reports citing officials familiar with the matter, the four lenders under consideration are the Central Bank of India, UCO Bank, Punjab & Sind Bank, and Indian Overseas Bank. Current government holdings in these institutions sit well above the 75% threshold: Punjab & Sind Bank stands at 93.85%, Indian Overseas Bank at 92.44%, UCO Bank at 90.95%, and the Central Bank of India at 81.19%.

To bridge this gap, the government plans to offload portions of its stake, potentially utilizing the offer-for-sale (OFS) route depending on prevailing market conditions. Individual banks may also independently raise funds through the market. While state-run financial institutions were previously exempted from the 25% minimum public shareholding norm until August 2026, the latest measures aim to gradually bring these four lenders into compliance with standard public float expectations.

Consolidation and Privatisation Context

Officials noted that increasing the public float is distinct from full privatisation, which would require separate legislative amendments—such as changes to the Banking Companies (Acquisition and Transfer of Undertakings) Act. However, the stake dilution runs parallel to ongoing discussions regarding a fresh round of public sector bank consolidation.

Long-term policy discussions involve narrowing the state-owned banking sector down to three or four large lenders. Previous reports from policy bodies like NITI Aayog had highlighted institutions such as the Central Bank of India and Indian Overseas Bank as potential candidates for privatisation, though no final execution timeline or binding decisions have been formally enacted.

Practical Implications and Reader Verification

• What is Confirmed: The government is exploring plans to reduce its shareholding in Central Bank of India, UCO Bank, Punjab & Sind Bank, and Indian Overseas Bank to 75% over the coming year via mechanisms like the OFS route, pending market conditions.
• What Remains Uncertain: Final timelines, exact pricing, the precise execution schedule for share sales, and legislative decisions concerning full privatisation have not been finalized.
• Reader Impact: Increased public shareholding could affect stock liquidity and valuations for the four targeted lenders, but depositors and everyday retail customers experience no immediate changes to bank operations, account terms, or branch services.
• How to Verify: Readers can review official updates, regulatory filings, and announcements directly through the Ministry of Finance portal or via official disclosures on stock exchange platforms like the BSE and NSE. For further details, consult the original coverage on [India Today](https://www.indiatoday.in/business/story/psu-bank-stake-sale-centre-cut-holdings-four-lenders-75-percent-privatisation-3023190-2026-10-23).