PSU Bank Stake Sale Alert! Government May Launch IOB OFS, Dilute Stake in UCO Bank, Punjab & Sind Bank: Report

The Centre is reportedly preparing to reduce its stake in several public sector banks (PSBs), with Indian Overseas Bank (IOB) expected to be the first in line for an Offer for Sale (OFS). The proposed stake sale is part of the government's ongoing efforts to comply with the Securities and Exchange Board of India's (SEBI) minimum public shareholding (MPS) norms while broadening public ownership in state-run lenders.

Government Likely to Launch Indian Overseas Bank OFS Soon

The government, which currently owns 92.44% of Indian Overseas Bank, is likely to launch an OFS in the lender shortly, as per NDTV Profit report. The move follows the Centre's successful stake dilution in December 2025, when it sold a 2.17% stake in IOB through an OFS that received strong participation from both retail and institutional investors.

UCO Bank, Punjab & Sind Bank, Central Bank Also Likely to See Stake Sale

The stake sale exercise is not expected to be limited to IOB. The NDTV Profit report said the government plans to continue reducing its holdings in other public sector banks over the coming months to meet public float requirements.

Among the banks likely to follow are Punjab & Sind Bank and UCO Bank, where the government's ownership remains significantly above the regulatory threshold. The Centre currently holds 93.85% in Punjab & Sind Bank and 90.95% in UCO Bank, both well above the level permitted under SEBI's minimum public shareholding norms.

Four PSU Banks on Government's Stake Sale List

Separately, an Informist report said the government is planning stake dilution in four public sector banks during the current quarter. These include:

Indian Overseas Bank - Government stake: 92.44%
Central Bank of India - Government stake remains above the minimum public shareholding requirement and is also slated for dilution.
UCO Bank - Government stake: 90.95%
Punjab & Sind Bank - Government stake: 93.85%

The report said the Centre may use either the Offer for Sale (OFS) route, the Qualified Institutional Placement (QIP) route, or a combination of both, depending on market conditions and regulatory approvals.

The proposed stake dilution was initially expected much earlier.

Government Revives PSU Bank Stake Sale Plan as Market Conditions Improve

The Finance Ministry had already granted in-principle approval for stake sales in Central Bank of India, UCO Bank and Punjab & Sind Bank during the October-December quarter of last year. However, volatile market conditions delayed the process.

"The finance ministry had given in-principle nod for QIP or OFS in Central Bank of India, UCO Bank, and Punjab & Sind Bank in Q3 (Oct-Dec) last year to lower stake, but the timeline got impacted due to market conditions," a senior Finance Ministry official told Informist.

The report added that improving market sentiment has revived the government's stake sale plans. Strong participation from both retail and institutional investors has created a favourable environment for the proposed transactions.

"There is strong demand from retail and non-retail investors currently, and we are waiting for some more approvals before the stake sales are announced," the official told Informist.

Why Is the Government Selling Its Stake?

SEBI requires listed companies to maintain a minimum public shareholding of 25%, meaning promoters cannot hold more than 75% of a listed entity over the long term. Several public sector banks continue to have government ownership well above this threshold.

By reducing its stake through OFS or QIP, the Centre aims to improve public shareholding, enhance liquidity in these banking stocks and ensure compliance with SEBI regulations, while continuing to retain management control over the lenders.

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