Govt seeks merchant bankers, legal firms to cut stake in public sector banks, financial institutions

New Delhi, Feb 24 (PTI) The Department of Investment and Public Asset Management (DIPAM) on Monday invited bids from merchant bankers and legal firms to assist the government divest its stake in public sector banks and listed financial institutions.

As per the two RFPs (request for proposal) floated by DIPAM, the merchant bankers and legal advisors would be empanelled for a period of three years, which could be extended by one more year. The last day for putting in bids by merchant bankers is March 27.

DIPAM, which is under the Finance Ministry, manages government shareholding in public sector entities.

Currently, a host of public sector banks and financial institutions are yet to meet the minimum 25 per cent public shareholding norm mandated by market regulator Sebi. The government has set August 1, 2026, deadline for such non-compliant entities to reduce government holding and meet public float norms.

With the invitation of bids for empanelment of merchant bankers, the government has set the ball rolling to lower its stake in banks and financial institutions.

Currently, five public sector banks are yet to meet the minimum public shareholding norm. The government currently holds a 98.3 per cent stake in Punjab & Sind Bank, 96.4 per cent in Indian Overseas Bank, 95.4 per cent in UCO Bank, 93.1 per cent in Central Bank of India and 86.5 per cent in Bank of Maharashtra.

Also, it holds a 86.36 per cent stake in financial institution IRFC, 85.44 per cent in insurance company The New India Assurance, 82.40 per cent in General Insurance Corporation.

Also, Finance Minister Nirmala Sitharaman in her 2021-22 Budget speech had announced the government’s intention to take up privatisation of two public sector banks, besides IDBI Bank.

The privatisation of IDBI Bank is currently under process.

As per the RFP, the merchant bankers-cum-selling brokers would advise the government on the timing and the modalities of the transaction for dilution of equity in select PSU banks/select listed public financial institutions.

“The Government of India (GOI) intends to empanel BRLMs/MBSBs for a period of three years (further extendable by one year) in the context of dilution of GOI equity in select Public Sector Banks (PSBs), and select listed Public Financial Institutions (PFIs) (as defined under the Companies Act, 2013) using SEBI approved methods in accordance with the extant SEBI/RBI/IRDAI and Stock Exchanges regulations/ guidelines,” DIPAM said while inviting bids.

The merchant bankers can apply for empanelment with DIPAM under two categories, depending upon the capacity of the bidders in handling the capital market transactions. The empanelment category would be ‘A ‘ for a transaction size of ₹2,500 crore or more, and ‘A’ for transaction size of less than ₹2,500 crore.

Among the empanelled merchant bankers, DIPAM may select one or more bankers for a specific transaction, depending on the requirement.

They would be required to conduct market surveys, domestic and international road shows to generate interest amongst prospective investors. Arrange meetings with top management and the domestic and international investors including institutional and HNIs, facilitate communications about the growth potential of the entity and articulate the key marketing themes and positioning of the entity.

All expenses in this regard will be borne by the bankers except the tour and stay expenses of government and officials of the PSB/listed PFI, the DIPAM said.