Source: ET
Context:
The Government of India has appointed Goldman Sachs as the sole transaction advisor for stake dilution in four public sector banks (PSBs) — UCO Bank, Central Bank of India, Punjab & Sind Bank, and Indian Overseas Bank (IOB).
What is Stake Dilution?
- Stake dilution means the government selling a portion of its equity in PSBs to other investors (retail, institutional, or foreign).
- This reduces the government’s shareholding percentage but brings in fresh capital and improves free float in markets.
- Role of Goldman Sachs: Responsible for structuring the transaction, identifying potential investors, and overseeing execution.
Why is Stake Dilution in PSBs Important?
- Capital Infusion – PSBs often need capital for lending growth, especially to support infrastructure and priority sectors.
- Market Discipline – With more private/retail investors, PSBs face higher scrutiny, leading to better governance.
- Privatisation Agenda – Stake dilution is a step towards disinvestment and possible privatisation of select PSBs.
- SEBI Norm Compliance – Listed entities must have 25% minimum public shareholding.
- Reducing Fiscal Burden – Less dependence on budgetary recapitalisation.
