Public Sector Banks, Insurance firm’s shares rallied as govt invites bids to divest stake in institutions

The Department of Investment and Public Asset Management (DIPAM) initiated an invitation for bids from merchant bankers and legal firms on Monday to assist the government in divesting its stake in public sector banks and listed financial institutions.

Consequently, shares of select state-run lenders, financial institutions, and insurers experienced a surge in trading on Tuesday, February 25. Merchant financiers and legal advisors will be chosen for a three-year term, which may be extended by an additional year, under the two RFPs (requests for proposals) issued by DIPAM.

Merchant bankers have until March 27 to submit their proposals. At present, many public sector banks and financial institutions have not yet achieved the minimum 25% public shareholding requirement set by market regulator SEBI.

Central Bank of India was trading 1.76% higher on the NSE in the early trade, while Bank of Maharashtra shares were up nearly 1%. UCO Bank was trading at a 0.74% increase. Additionally, Punjab & Sind Bank's shares were up 0.33%, while IOB's were trading 0.45% higher.

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Furthermore, The New India Assurance, a state-run insurance company, was up 1% on the NSE at Rs 158.07. IRFC shares were also trading over 1% higher at Rs 124.90 apiece on the NSE. DIPAM, which is under the Finance Ministry, manages government shareholding in public sector entities.

The government has set an August 1, 2026, deadline for such non-compliant entities to reduce government holding and meet public float norms. At present, the minimal public shareholding norm has not been achieved by five public sector banks.

Currently, the government has a 98.3% stake in Punjab & Sind Bank, 96.4% in Indian Overseas Bank, 95.4% in UCO Bank, 93.1% in Central Bank of India, and 86.5% in Bank of Maharashtra.

Additionally, it maintains an 86.36% stake in the financial institution IRFC, an 85.44% stake in the insurance company The New India Assurance, and an 82.40% stake in the General Insurance Corporation.