India Plans to Cut Stakes in Four Banks to 75%, Economic Times Reports
Key Facts
The Indian government plans to reduce its stakes in four public sector banks to 75%, according to a report in the Economic Times. The banks are Central Bank of India, Indian Overseas Bank, Punjab & Sind Bank and UCO Bank. The target puts expanding public shareholding at the heart of the move, as UCO Bank's 2025 general meeting notice confirms that the minimum required public shareholding is 25%. That level allows the government to retain a majority stake while increasing participation by outside investors. Reducing government ownership is distinct from privatising a bank and transferring control, and can also be achieved by issuing new shares without the government selling its shares.
Data from the Indian Finance Ministry's Department of Financial Services show government ownership remained high in the banks concerned at the end of March 2026. The government's stake in Punjab & Sind Bank stood at 93.85%, the highest among the banks. Its stake in Indian Overseas Bank was 92.44%, followed by 90.95% in UCO Bank. Government ownership in Central Bank of India stood at 89.27%, the lowest in the group. These levels leave the banks needing different reductions in government ownership to reach the level reported by the newspaper, depending on the state's existing stake in each.
On increasing public shareholding through capital raising, UCO Bank said in its general meeting notice that "raising capital through the issuance of shares would help increase public shareholding". This approach links broadening the shareholder base to bringing funds into the bank through share issuance, rather than limiting the process to transferring existing government shares to buyers. The bank previously raised 2,000 crore rupees through a qualified institutional placement on 27 March 2025, according to Investing.com. The placement aimed to strengthen its capital base and comply with minimum public shareholding rules. The earlier transaction thus combined a financing objective related to the bank's capital with a regulatory objective related to its ownership structure.
The proposal to privatise two public sector banks and a general insurance company dates back to the 2021–2022 budget announcement, according to the Indian Finance Ministry. That proposal concerned privatisation, while increasing public shareholding is also linked to public shareholding requirements for banks. In an earlier government stake sale, the government fully exercised the additional sale option in the Bank of Maharashtra offering, according to a Finance Ministry statement dated 2 December 2025. Exercising the option increased the total divestment to 6.0% of the bank's paid-up capital. The ministry said subscriptions from non-retail investors reached 4.07 times the offering's base size on the opening day of bidding. That subscription level reflects demand for the earlier offering, which took the form of a government divestment through a share sale.
In a separate transaction involving IDBI Bank, the structure approved on 14 October 2026 specified the stakes government shareholders would retain after the sale, according to the Indian Finance Ministry. The structure provides for the government to retain a 15% stake after the transaction is completed. It also provides for Life Insurance Corporation to retain a 19% stake. Completion of this process is subject to regulatory obligations to the Reserve Bank of India, according to the government statement on the transaction. The successful buyer must submit a "plan to comply with the stipulated regulatory conditions" as one of the steps required to carry out the transaction.