The Government of India has launched the process to sell up to 8% stake in Central Bank of India via the Offer For Sale (OFS) route.
According to reports, the proposed sale could help the government raise nearly ₹2,244.8 crore, making it one of the key PSU divestment transactions currently underway.
The OFS structure will reportedly be conducted in two phases:
- Day 1 for institutional investors
- Day 2 for retail investors and employees
The move is expected to reduce the government’s holding while increasing public shareholding in the state-run lender.
Why The Government Is Selling Stake In PSUs Again
The Central Bank of India OFS is part of a much broader disinvestment and capital management strategy being executed by the Department of Investment and Public Asset Management (DIPAM).
Over the last few years, the government has increasingly used:
- OFS transactions
- Strategic stake sales
- QIPs
- IPOs
- Minority stake dilution
to raise non-tax revenue and improve market participation in public sector enterprises.
DIPAM has already signaled that multiple OFSs and PSU fundraising exercises are likely during FY26.
The Centre is also under pressure to:
- Improve fiscal management
- Meet disinvestment targets
- Increase public float in listed PSUs
- Strengthen capital position of state-owned institutions
The Backstory: Why Public Sector Banks Are Under Focus
Public sector banks have undergone massive transformation since India’s banking crisis period between 2015 and 2020.
At that time, many PSBs were battling:
- High NPAs
- Weak profitability
- Capital shortages
- Slow credit growth
The government injected large amounts of capital into PSU banks over several years to stabilize the system.
However, after cleanup measures, mergers, digitization, and economic recovery, many state-run banks have now returned to profitability and stronger balance sheets.
That recovery has created a new opportunity for the government:
partially monetize holdings while market valuations remain stronger.
Central Bank of India itself has shown improvement in recent years after a long period of operational stress.
PSU Divestment Is Accelerating Again
The Central Bank OFS also reflects renewed momentum in India’s PSU divestment cycle.
Recent reports suggest the government is evaluating or preparing stake sales in multiple state-run companies, including:
- Coal India
- LIC
- IDBI Bank
- Other PSUs under DIPAM’s pipeline
DIPAM officials have repeatedly indicated that the government is now following a more “composite disinvestment strategy,” balancing:
- Market timing
- Retail participation
- Institutional demand
- Fiscal targets
- PSU capital requirements
Why OFS Matters For Investors
Offer For Sale transactions often attract strong investor interest because shares are usually offered at a discount compared to prevailing market prices.
Retail investors also typically receive additional discounts in PSU OFSs.
For the government, OFS remains one of the fastest and most efficient methods to dilute stake in listed entities without going through lengthy IPO-style procedures.
However, large OFSs can also create short-term pressure on stock prices because of temporary increase in share supply.
Public Sector Banking Is Changing Rapidly
The bigger story behind the Central Bank OFS is the ongoing transformation of India’s public sector banking ecosystem.
PSU banks today are no longer being viewed purely as slow-moving state institutions. Many are:
- Improving profitability
- Expanding digital banking
- Growing retail loan books
- Competing aggressively with private banks
- Strengthening operational efficiency
At the same time, the government appears increasingly willing to reduce ownership gradually while retaining strategic control in key institutions.
For now, the Central Bank OFS signals one thing clearly: India’s PSU disinvestment engine is becoming active again — and public sector banks are once again at the center of that strategy.
