India picks banks for Axis Bank stake sale: sources

NEW DELHI/MUMBAI (Reuters) - India has chosen JPMorgan Chase & Co, Citigroup Inc and JM Financial Ltd to help sell half of the government's stake in Axis BankLtd valued at $925 million, said three people involved in the process.

The sale is part of a search for funds to narrow the government's fiscal deficit to 4.8 percent of gross domestic product in the financial year ending March 2014 from 4.9 percent a year earlier.

The government aims to raise around $9 billion by selling shares but has managed just 3 percent of that amount.

Half of its 20.7 percent stake in India's third-largest private-sector bank by assets is likely to be auctioned by the end of February, said the people, who declined to be identified as they were not authorised to speak to the media.

At the bank's current market price, the stake on offer is worth about 57 billion rupees, the people said.

A spokesman for Citigroup in Mumbai declined to comment, whereas JPMorgan and local brokerage JM Financial did not immediately respond to requests for comment. The spokesman at the finance ministry was not available for comment.

Slower-than-budgeted tax receipts and high public expenditure have increased the government's reliance on selling shares to narrow a budget shortfall in an economy growing at its slowest pace in a decade.

On Monday, the government approved the auction of its residual stake in Hindustan Zinc Ltd , controlled by London-listed Vedanta Resources Plc . It has also lined up a 10 percent stake sale in Indian Oil Corp .

The government, through the Special Undertaking of Unit Trust of India, also owns shares of cigarette maker ITC and engineering and construction firm Larsen & Toubro Ltd .

The fiscal deficit by November had reached nearly 94 percent of the government's full-year target, piling pressure on the finance ministry to find alternative sources of revenue.

By fiscal-year end, it will receive a dividend of roughly $3 billion from state-run miner Coal India Ltd .

(Reporting by Rajesh Kumar Singh and Sumeet Chatterjee; Editing by Frank Jack Daniel and Christopher Cushing)