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StocksMediumUpdated×3•Originally published 23 October 2026•Updated 23 October 2026•
4 min read

India weighs cutting stakes in four state-owned banks to 75%

Key Facts

1The Indian government is considering reducing its holdings in four state-owned banks to 75% to comply with public shareholding requirements.
2The government held 93.85% of Punjab & Sind Bank at the end of March 2026.
3The government reduced its holding in Central Bank of India to 81.19% after selling an 8.08% stake in May 2026.
4Punjab & Sind Bank secured board approval to raise up to 3,000 crore rupees through a qualified institutional placement.
5India permits foreign direct investment in public-sector banks of up to 20% through government approval.

The Indian government is considering reducing its holdings in four public-sector banks to 75% to comply with minimum public shareholding requirements, according to a report published by Moneycontrol on 23 October 2026, citing the Economic Times. The review covers Central Bank of India, UCO Bank, Punjab & Sind Bank and Indian Overseas Bank, with the government retaining a majority at the target level. The state held 93.85% of Punjab & Sind Bank at the end of March 2026, according to a table from the Indian Finance Ministry's Department of Financial Services. Its stake in Indian Overseas Bank stood at 92.44% on the same date. Government ownership of UCO Bank was 90.95%, according to the same table. Punjab & Sind Bank had the highest government ownership among these banks in that comparison, followed by Indian Overseas Bank and UCO Bank.

The government previously reduced its holding in Central Bank of India by selling an 8.08% stake through an offer for sale, according to CARE Ratings. Its ownership following the transaction stood at 81.19% on 26 May 2026, putting the bank closer to the target level than the stakes recorded for the other banks at the end of March. On financial performance, the bank's net profit rose to 4,369 crore rupees in the year ended March 2026, from 3,785 crore rupees in the previous year, according to the Department of Financial Services. In its report dated 4 August 2026, CRISIL upgraded the bank's corporate credit rating from AA to AA+, with a stable outlook. The agency attributed the decision to "continued improvement in profitability and asset quality". CRISIL expected this improvement to continue over the medium term, in an assessment linking the upgrade to the bank's financial performance.

Securities and Exchange Board of India rules allow controlling shareholders to sell shares through the stock exchange mechanism as one way to meet minimum public shareholding requirements. The regulator also lists qualified institutional placements among the routes to compliance, allowing institutional investors to increase their share of capital. India permits foreign direct investment in public-sector banks of up to 20% through the government approval route, according to the Department of Financial Services. In a previous government stake sale in Bank of Maharashtra, subscriptions reached 4.07 times the base offer size, according to a Finance Ministry statement dated 2 December 2025. The government exercised the additional sale option in full, bringing the total divestment to 6.0% of the bank's paid-up capital. The fundraising and share-sale moves come in a sector that the Department of Financial Services says has received no government capital injections since April 2022.

Meanwhile, on 14 October 2026, the government approved "10955230 Canada Incorporated", a subsidiary of Fairfax Financial Holdings, as the strategic buyer of IDBI Bank, according to a Finance Ministry statement. This approval concerns a transaction separate from the review of reductions in government ownership of the four banks. The announced sale structure leaves the government with a residual stake of 15%, according to the government statement on the bank's restructuring. It also leaves Life Insurance Corporation with a 19% stake in the bank's capital. Completion of the IDBI transaction remains subject to Reserve Bank of India approval, according to Investing.com's coverage of the deal.

Regarding funding for the banks under review, Punjab & Sind Bank secured board approval to raise up to 3,000 crore rupees through a qualified institutional placement, according to CRISIL's report dated 9 September 2026. Moneycontrol cited the Economic Times as saying the banks can raise funds in line with their strategies, while the government considers selling existing shares through the offer-for-sale mechanism. Execution of the government's sales depends on market conditions, according to the coverage, making the timing of the offerings contingent on those conditions. The coverage quoted an official as saying the immediate priority was to increase public ownership of the banks concerned "over the next year". The timeframe outlined in the 23 October 2026 report thus extends into the following year, leaving each bank to pursue fundraising in line with its strategy.