PSU Banks IOB, UCO Bank and Other Edge Higher as Government Plans Capital Infusion to Meet SEBI Norms

On September 17, 2025, shares of four public sector banks, Indian Overseas Bank, Punjab & Sind Bank, UCO Bank, and Central Bank of India, recorded a modest gain. The gain in PSU banks follows the remarks by M. Nagaraju, Secretary of the Department of Financial Services (DFS). Nagaraju announced that these state-owned lenders will raise capital this year to comply with the Securities and Exchange Board of India's (SEBI) minimum public shareholding (MPS) requirement.

Current Shareholding Structure

As per SEBI guidelines, all listed companies must maintain a minimum public shareholding of 25%. However, these four banks currently have government ownership close to or above 90%, based on data from the quarter ending June 2025.

These banks recently raised between ₹1,500 crore and ₹2,000 crore each via Qualified Institutional Placements (QIPs), although the capital infusion had minimal impact on the government’s controlling stake.

Importantly, the DFS secretary clarified that there is no proposal to reduce government ownership below 51% in any PSU bank.

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DFS Secretary M. Nagaraju Take on Bank Shareholding

Nagaraju emphasised the dual purpose of the upcoming capital-raising exercise: enhancing lending capacity and achieving regulatory compliance. “We need capital. This year, we are going to raise funds for four banks to comply with SEBI’s public shareholding norms. With adequate capital, we will also be in a stronger position to support credit growth,” he said.

He also noted that robust credit growth is being supported by last year’s strong profitability, low inflation, and adequate liquidity in the system. “We’re optimistic. The macroeconomic conditions are favourable, and we want to signal our intent to expand lending,” Nagaraju added. “Public sector banks will continue to be majority government owned. There’s a clear public interest in maintaining government control over these institutions,” he stated.

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