Bank of Maharashtra, UCO Bank, among 5 PSUs to reduce govt shareholding amid MPS norms

Bank of Maharashtra, Indian Overseas Bank (IOB) and three other public-sector undertakings (PSUs) are planning to reduce their government stake to less than 75 per cent to comply with the minimum public shareholding (MPS) norms set by capital markets regulator Securities and Exchange Board of India (SEBI).

Financial Services Secretary Vivek Joshi told news agency PTI that out of 12 public sector banks (PSBs), four were complying with MPS norms as on March 31, 2023. Three more PSBs have complied with minimum 25 per cent public float during the current financial year, and the remaining five PSBs have laid out action plans to comply with the MPS requirement, Joshi told PTI.

Presently, the government holding in Delhi-based Punjab & Sind Bank is 98.25 per cent, followed by Chennai-based IOB at 96.38 per cent, UCO Bank at 95.39 per cent, Central Bank of India at 93.08 per cent, Bank of Maharashtra at 86.46 per cent.

According to SEBI, all listed companies must maintain an MPS of 25 per cent. However, the regulator had given special extension to the state-owned banks. They have time till August 2024 to meet the requirement of 25 per cent MPS. Joshi added that banks have various options to bring down the stake, including follow on initial public offering (IPO) or a Qualified Institutional Placement (QIP).

Depending upon the market condition, each of these banks will take a call in the best interest of shareholders. Joshi also said the finance ministry has directed all state-owned banks to review their gold loan portfolio as instances of non-compliance with regulatory norms have been noticed by the government.

Also Read: Sebi tweaks rules for minimum public float for listed companies

The Department of Financial Services (DFS) asked the heads of PSBs to look at their system and processes related to gold loan. A directive in this regard was issued last month advising them to fix anomalies relating to collection of fees and interest and closure of gold loan accounts.

The letter flagged various concerns, including disbursement of gold loans without requisite gold collateral, anomalies regarding collection of fees and repayment in cash. The DFS urged banks to undertake a thorough review of the last two-year period from January 1, 2022 to January 31, 2024 so as to ensure that all gold loans were disbursed in compliance with regulatory requirements and internal policies of banks.

It is to be noted that the price of the yellow metal has surged to a record level. Price of 10 gm gold in the last one month jumped from ₹63,365 to ₹67,605. According to the letter, the department has come across instances of non-compliance regarding the gold loan portfolio and hence issued the advisory.

The country's biggest lender, State Bank of India (SBI) alone has a gold loan portfolio of ₹30,881 crore as of December 2023. Punjab National Bank's gold loan exposure stood at ₹5,315 crore while Bank of Baroda was at ₹3,682 crore at the end of the third quarter, according to news agency PTI.