The Centre is set to launch an Offer for Sale (OFS) in Indian Overseas Bank (IOB) as part of its plan to reduce its holding in public sector banks and comply with minimum public shareholding norms, according to official sources reported by NDTV Profit. The government currently holds a 92.44% stake in Indian Overseas Bank and is expected to soon launch the OFS to pare its shareholding. This follows the government's successful stake sale in December 2025, when it diluted a 2.17% stake in IOB through an OFS that received strong response from both retail and institutional investors.
According to official sources, the government is expected to continue stake sales in public sector banks over the coming months to meet public float requirements. Punjab & Sind Bank and UCO Bank are likely to be the next candidates for stake dilution, with the government currently owning 93.85% of Punjab & Sind Bank and 90.95% of UCO Bank, both significantly above the minimum public shareholding threshold prescribed for listed companies. As per Informist reports, the government is planning stake dilution in four public sector banks during the current quarter, including Central Bank of India which also remains above the regulatory threshold.
The proposed stake dilution was initially expected much earlier, but volatile market conditions had delayed the process. A senior Finance Ministry official told Informist that "the finance ministry had given in-principle nod for QIP or OFS in Central Bank of India, UCO Bank, and Punjab & Sind Bank in Q3 (Oct-Dec) last year to lower stake, but the timeline got impacted due to market conditions." However, improving market sentiment has revived the government's stake sale plans, with strong participation from both retail and institutional investors creating a favourable environment. The Centre may use either the Offer for Sale (OFS) route, the Qualified Institutional Placement (QIP) route, or a combination of both, depending on market conditions and regulatory approvals.
The proposed stake sales form part of the Centre's broader disinvestment strategy aimed at improving market liquidity in state-owned enterprises while maintaining majority ownership. SEBI requires listed companies to maintain a minimum public shareholding of 25%, meaning promoters cannot hold more than 75% of a listed entity over the long term. By reducing its stake through OFS or QIP, the Centre aims to improve public shareholding, enhance liquidity in these banking stocks and ensure compliance with SEBI regulations, while continuing to retain management control over the lenders.
