Finance Ministry Aims At Trimming Govt Equity In PSBs to 52%

By intensifying stake in the government, banks will be assisted in meeting the 25 percent public float norms of market regulator Securities and Exchange Board of India

New Delhi: The Finance Ministry has asked state-run banks to lessen the government's equity to 52 percent steadily, a senior official said. "The government is essentially a major shareholder. So, this needs to be aligned to the best corporate practices. The shareholding needs to come down to at least 52 per cent in the first phase. As and when market condition allows, banks will take a step in that direction. They have all the permission in hand," Financial Services Secretary Rajiv Kumar said.

By intensifying stake in the government, banks will be assisted in meeting the 25 percent public float norms of market regulator Securities and Exchange Board of India (SEBI). Some of the state banks have government's holding beyond 75 percent. Additionally, the dilution will also promote public sector banks to follow the prudential lending norms.

State Bank of India (SBI), India's largest lender, is already seeking bids from merchant bankers to operate its qualified institutional placement (QIP) of shares, which are valued at close to Rs 20,000 crore. The government stake will be diluted from the existing 58.53 percent, following the QIP.

A few lenders, including Union Bank of India, Syndicate Bank, Oriental Bank of Commerce and Punjab National Bank, have already initiated a process of issuing Employee Share Purchase Scheme (ESPS).

Kumar also added that the government has begun its consolidation process of Regional Rural Banks (RRBs) to assist rural India better.