FinMin clears decks for PNB, BoM to raise Rs 10,000 cr via QIP in FY25

Receives similar proposals from Union Bank of India, UCO Bank, Indian Overseas Bank

The Union Ministry of Finance has approved the proposals of Punjab National Bank (PNB) and Bank of Maharashtra (BoM) to cumulatively raise Rs 10,000 crore through Qualified Institutional Placement (QIP) in 2024-25, a senior government official familiar with the matter said.

“We have given the approval for PNB and BoM to raise Rs 5,000 crore each through QIP in FY25. Both banks have conducted road shows in places such as Hong Kong,” said the senior government official.

The annual general meetings (AGMs) of PNB and BoM had earlier approved raising Rs 7,500 crore each by selling shares via QIP or follow-on public offer (FPO) in FY25.

Unlike offer for sale (OFS), where money raised goes to the government as it involves selling existing shares, QIP involves issuing new shares and the funds go directly to the company.

The source said the ministry had received similar proposals from Union Bank of India to raise Rs 6,000 crore, UCO Bank and Indian Overseas Bank (IOB) to raise Rs 2,000 crore each via QIP. India has 12 public sector banks, including State Bank of India, PNB, BoM, and others.

“This funding will help some of the banks meet the minimum public shareholding norms set by the Securities and Exchange Board of India (Sebi),” said the source.

It added that Central Bank of India had also sent its request to raise Rs 3,000 crore this year.

Emails sent to the finance ministry, PNB, BoM, UCO Bank, IOB, and Central Bank of India remained unanswered until the time of going to press.

Sanjay Agarwal, senior director at CARE Ratings, said these fundraising efforts would help banks comply with the regulator’s guidelines. “Additionally, the banking sector has performed well in the market over the past two to three years, and this is being recognised. With share prices currently favourable, banks are growing annually and need capital. QIP helps meet these additional needs and ensures Sebi requirements for adequate market floating. It is the right time for banks to seek funds from the market,” said Agarwal.

Sebi has mandated all listed companies to maintain a minimum public shareholding of 25 per cent. However, the regulator had granted special forbearance to state-owned banks and public-sector units that allow them time until August 2026 to meet the requirement with the government's stake expected to fall to 75 per cent or below it.

PNB has already complied with the requirement with a government stake at 73.14 per cent. The Union government owns 86.46 per cent stake in BoM, with 11.46 per cent needs to be sold to meet the requirement.

Similarly, Central Bank of India, IOB, and UCO Bank are required to lower their government stakes by 18.08 per cent, 21.38 per cent, and 20.39 per cent, respectively.