The Finance Ministry has asked the public sector banks to gradually reduce the government’s equity to 52 per cent. Currently, some of the public sector banks have government’s holding beyond 75 per cent.
Why the disinvestment?
The decision to bring down the government’s equity to 52 per cent was taken due to the following reasons:
- Dilution of the government’s stake will help banks to meet 25 per cent public float norms set by the SEBI.
- To align with the best corporate practices.
- Encourage the banks to follow the prudential lending norms.
The Ministry of Finance has authorised the Public Sector Banks to take necessary steps in bringing down the government equity based on the marketing conditions.
Rules of SEBI
A notification under the Securities Contracts Regulations (Amendment) Rules makes it mandatory for all listed entities to have a minimum public float of 25%.