The Ministry of Finance has given permission to the banks to go for qualified institutional placements or QIPs and it is expected that the banks will raise Rs 5000 crores from the QIPs, said Financial Services Secretary M Nagaraju on Saturday.
"We have given permission to most of the banks to go for the QIP. So that they sell these shares to the public,” added DFS Secretary M Nagaraju
The Ministry of Finance has given permission to the banks to go for qualified institutional placements or QIPs and it is expected that the banks will raise Rs 5000 crores from the QIPs, said Financial Services Secretary M Nagaraju on Saturday.
“This year they are going to raise about 5000 crores from the QIP. We have given permission to all the banks,” added the Department of Financial Service Secretary.
QIP enables publicly traded companies to raise capital by issuing fresh equity shares, convertible debentures, or other securities to qualified institutional buyers (QIBs). This mechanism provides PSU banks with a streamlined fundraising avenue while ensuring regulatory compliance. Under the Securities and Exchange Board of India (SEBI) regulations, the central government must lower its holdings in state-owned banks to a maximum of 75%. This move aims to enhance market liquidity, broaden institutional participation.
“The current thinking is that the SEBI norms, we have to meet 75%. So we are gradually going to the QIP. In the last six months, we have given permission to most of the banks to go for the QIP. So that they sell these shares to the public,” added M Nagaraju.
A Finance Ministry memorandum states that, in the public interest, the government has granted public sector banks and financial institutions an exemption, allowing them until August 1, 2026, to raise public shareholding to at least 25 %.
The government holds over 90 % in several state-owned lenders, including 98.25 % in Punjab & Sind Bank, 96.38 % in Indian Overseas Bank, 95.39 % in UCO Bank, and 93.08 % in Central Bank of India, as per BSE filings for the December quarter.
Public sector banks have previously utilised QIPs to bolster capital, leading to a gradual reduction in the government’s stake in state-owned lenders. In last September, Punjab National Bank secured Rs5,000 crore via a QIP, while Bank of Maharashtra followed in October, raising Rs 3,500 crore. Other state-run banks such as Union Bank of India, Indian Bank, Bank of India, Federal Bank, and J&K Bank tapped capital markets through Qualified Institutional Placements in 2023, diluting the government’s stake. Punjab and Sind Bank plans to raise Rs 2,000 crore through Qualified Institutional Placement (QIP) during the ongoing quarter, confirmed Swarup Kumar Saha, MD.
The central government has not been providing capital to banks through the Union budget for the last few times. Instead, the government is encouraging banks to leverage their improved financial standing to raise funds independently.