Five state-owned banks are planning to trim government stake to less than 75% to comply with market regulator SEBI’s minimum public shareholding rules.

Four among the 12 public sector banks (PSBs) were complying with the minimum public shareholding norms as on 31 March 2023.

"As part of an ongoing effort, three more PSBs have complied with minimum 25% public float during the current financial year. Remaining five PSBs have laid out action plans to meet minimum public shareholding requirement," Financial Services Secretary Vivek Joshi told PTI in an interaction.

The banks that need to act are Central Bank of India, UCO Bank, Bank of Maharashtra, Punjab & Sind Bank and Indian Overseas Bank.

The government holding in Delhi-based Punjab & Sind Bank is 98.25%, followed by Chennai-based Indian Overseas Bank at 96.38%, UCO Bank 95.39%, Central Bank of India 93.08% and Bank of Maharashtra at 86.46%.

As per the Securities and Exchange Board of India (SEBI), all listed companies must maintain a minimum public shareholding of 25%.

However, the regulator had given special forbearance to state-owned banks. They have time till August 2024 to meet the requirement of 25% minimum public shareholding.

Joshi told PTI banks have various options to bring down the stake, including follow on public offering or qualified institutional placement (QIP).

Depending on market condition, each of these banks will take a call in the best interest of shareholders, he added. Without giving a timeline, he said, efforts were on to meet the requirement.

Joshi told PTI the finance ministry has directed all state-owned banks to review their gold loan portfolio as instances of non-compliance with regulatory norms have been noticed by the government.

The Department of Financial Services (DFS) in a communication addressed to heads of PSBs has asked them to look at their system and processes related to gold loan.

A directive in this regard was issued last month advising them to fix anomalies relating to collection of fees and interest and closure of gold loan accounts.

The letter flagged various concerns, including disbursement of gold loans without requisite gold collateral, anomalies regarding collection of fees and repayment in cash, PTI reported.

The DFS urged banks to undertake a thorough review of the last two-year period from 1 January 2022 to 31 January 2024 so as to ensure that all gold loans were disbursed in compliance with regulatory requirements and internal policies of banks.