The Indian government is preparing to offload minority stakes in five public sector banks through the Offer for Sale (OFS) route in the financial year 2026-27. The banks identified for this move are Bank of Maharashtra, Indian Overseas Bank, UCO Bank, Central Bank of India, and Punjab and Sind Bank.
A senior official confirmed that while strategic disinvestment is not under consideration currently, OFS is likely the route the government will take, though not in the current fiscal year.
Why OFS and Not Strategic Sale?
According to sources, a strategic sale would require cabinet-level approval and inter-ministerial coordination, which is not in progress at this stage. The government, instead, is opting for the OFS route to reduce its stake while raising funds for the exchequer.
This would be a notable first, as OFS has not previously been used for PSU banks. Until now, banks have mostly raised capital through Qualified Institutional Placements (QIPs), which increase bank funds but do not reduce government shareholding.
Preparations Already Underway
DIPAM (Department of Investment and Public Asset Management) has initiated the process by empanelling merchant bankers and transaction advisors. These are divided into two categories:
- Category A: For deals under ₹2,000 crore
- Category A+: For deals above ₹2,000 crore
Officials are closely monitoring valuation charts, market trends, and other economic indicators to determine the right timing for these sales.
Government Holdings in the Targeted Banks
The current government holdings in these five banks are:
- Bank of Maharashtra: 86.46%
- Indian Overseas Bank: 96.38%
- UCO Bank: 95.39%
- Central Bank of India: 93.08%
- Punjab and Sind Bank: 98.25%
Investor Sentiment on the Rise
With growing interest in the banking sector and recent progress in the strategic disinvestment of IDBI Bank, investor sentiment is positive. The government aims to ride this momentum and improve fiscal outcomes through timely stake sales, without causing market disruptions.
