PSU Banks’ Disinvestment: Panel to Be Appointed Soon for Stake Sale

According to a Moneycontrol report, the government is progressing with its disinvestment strategy in public sector banks as a ministerial group is likely to meet to appoint advisers for facilitating stake dilution. The initial focus will be on minority stake sales in 5 banks, aiming for a gradual, market-friendly approach.

Advisers to Be Appointed for Disinvestment in 5 PSU Banks

An inter-ministerial group is expected to finalise legal and technical advisers to lead the disinvestment process in 5 public sector banks, namely Bank of Maharashtra, Indian Overseas Bank, UCO Bank, Central Bank of India and Punjab and Sind Bank. The government plans to offload minority stakes and test investor appetite without losing management control.

Stake Dilution Strategy and Participating Departments

The transaction will be jointly handled by the Department of Investment and Public Asset Management (DIPAM) and the Department of Financial Services (DFS). They will coordinate with selected advisers to design the structure, ensure regulatory readiness, and navigate required approvals. The anticipated dilution will be phased and driven by market evaluations.

Merchant Bankers to Support the Process

To assist with execution, merchant bankers will be shortlisted across 2 categories. Category A will handle deals below ₹2,000 crore, and Category A+ will manage larger transactions. Their role will include due diligence, document preparation and securing clearances.

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Background and Ownership Levels

The government currently holds significant stakes in these banks: 86.46% in Bank of Maharashtra, 96.38% in Indian Overseas Bank, 95.39% in UCO Bank, 93.08% in Central Bank of India, and 98.25% in Punjab and Sind Bank. The disinvestment will mark a step towards reducing its footprint in non-strategic areas of banking.

Projected Timeline for Execution

While the appointment of advisers is scheduled for July 8, the actual stake sale process is expected to roll out during FY26, with execution likely extending into FY27. The initiative is structured to avoid disruptions and retain administrative stability in the involved banks.

Conclusion

The government’s planned stake dilution in 5 PSU banks takes a cautious yet strategic step forward with the appointment of advisers. Through this, it continues its broader disinvestment agenda while retaining management control and monitoring market responsiveness.

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