In a bid to align with the best corporate practices, the Finance Ministry has asked the public sector banks to gradually bring down the government’s equity to 52 per cent, a top official said.
“The government is essentially a major shareholder. So, this need 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 step in that direction. They have all the permission in hand,” Financial Services Secretary Rajiv Kumar told agencies.
Dilution of government stake will help banks to meet 25 per cent public float norms of market regulator SEBI. Some of the public sector banks have government’s holding beyond 75 per cent.
Besides, it will encourage the banks to follow the prudential lending norms.
The country’s largest lender State Bank of India (SBI) has already initiated step for Rs 20,000 crore share sale through qualified institutional placement (QIP). Post QIP, the government stake will be diluted from the existing 58.53 per cent.
Last month, shareholders of the bank approved sale of shares to fund the business growth.
Many other banks are planning to raise capital through some means or other, depending on the market condition.
Some of the lenders like Syndicate Bank, Union Bank of India, Punjab National Bank, and Oriental Bank of Commerce among others have already issued or in process of issuing Employee Share Purchase Scheme (ESPS).
He further said that the government has also initiated the process for consolidation of Regional Rural Banks (RRBs) to better serve the needs of the rural India.
Recently, the Centre has amalgamated three RRBs — Punjab Gramin Bank, Malwa Gramin Bank and Sutlej Gramin Bank — into a single RRB with effect from January 1.
Currently, the Centre holds 50 per cent in RRBs, while 35 per cent and 15 per cent are with the concerned sponsor banks and state governments, respectively.