In a bid to align with the Securities and Exchange Board of India’s (SEBI) minimum public shareholding (MPS) norms, five public sector lenders, including Bank of Maharashtra, IOB, and UCO Bank, are strategically planning to reduce government stake to less than 75 per cent, according to Financial Services Secretary Vivek Joshi.
As of March 31, 2023, only four out of the twelve public sector banks (PSBs) were in compliance with the MPS norms. However, Joshi revealed that three more PSBs have achieved the minimum 25 per cent public float during the current fiscal year, while the remaining five have devised action plans to meet the MPS requirement.
Presently, the government holds majority stakes in several PSBs, such as Delhi-based Punjab & Sind Bank, Chennai-based Indian Overseas Bank, UCO Bank, Central Bank of India, and Bank of Maharashtra. These banks are now gearing up to reduce their government holdings to adhere to SEBI’s directives.
SEBI mandates that all listed companies maintain a minimum public shareholding of 25 per cent. Although state-owned banks were granted an extension until August 2024 to meet this requirement, they are actively exploring options to decrease their stake, which includes follow-on public offerings or Qualified Institutional Placements.
Joshi emphasized that each bank will evaluate market conditions and opt for the most beneficial strategy for its shareholders. While he didn’t specify a timeline, he assured that efforts are underway to fulfill the regulatory requirement.
Meanwhile, the Department of Financial Services (DFS) has instructed all PSBs to review their gold loan portfolios due to observed instances of non-compliance with regulatory norms. Banks have been directed to examine their systems and processes related to gold loans, addressing concerns such as disbursement without proper collateral and anomalies in fee collection and account closure.
The DFS’s advisory highlights the surge in gold prices, with the yellow metal reaching record levels in recent months. Against this backdrop, banks are urged to conduct a thorough review of their gold loan activities spanning the last two years to ensure compliance with regulatory requirements and internal policies.
State Bank of India (SBI), the nation’s largest lender, alone holds a gold loan portfolio worth Rs 30,881 crore as of December 2023. Other major PSBs like Punjab National Bank and Bank of Baroda also have substantial exposures in the gold loan segment, emphasizing the importance of regulatory compliance in this area.
As PSU banks embark on initiatives to reduce government shareholding and enhance compliance with SEBI regulations, the scrutiny on their gold loan portfolios underscores the need for robust risk management practices and adherence to regulatory guidelines in the banking sector.
