In the first quarter of 2025, banks and NBFCs raised capital through qualified institutional placements (QIPs) worth Rs 7,456 crore, a 46% rise from Rs 5,100 crore in the same period last year. Banks played a dominant role, raising nearly Rs 6,100 crore during January to March. Industry experts say this increase was mainly driven by the need to comply with Sebi’s rule that requires a minimum public shareholding of 25%.
Nirav Shah, managing director of Equirus Capital, explained that the almost 50% growth in funds raised shows the government’s effort to meet Sebi mandates. He added that the Department of Investment and Public Asset Management plans to offer shares to the public to boost retail ownership in government banks. This trend of raising capital is likely to continue throughout 2025.
The strong financial health of these state-owned banks, especially their improved margins and lower non-performing loans, supports market approval. Banks like Indian Overseas Bank, Central Bank of India, Punjab & Sind Bank, and UCO Bank hold over 90% government shares. Under Sebi rules, banks must reduce this to 75%. QIPs allow these banks to sell shares or convertible securities to qualified institutional buyers.
UCO Bank raised Rs 2,000 crore from a QIP in March, the highest among all banks. Central Bank of India and Indian Overseas Bank sold Rs 1,500 crore and Rs 1,437 crore worth of shares, respectively, to institutional investors.
An official from a public sector bank said, “These funds will strengthen banks’ capital and help them lend more. This will better serve their customers’ financing needs.”
By raising funds through QIPs, the government’s stake in these banks dropped by March 2025. The shareholding in Indian Overseas Bank fell to 94.65% from 96.38%. Central Bank of India’s stake declined to 89.27% from 93.08%. UCO Bank’s ownership dropped to 90.95% from 95.39%. Punjab & Sind Bank’s government stake decreased to 93.85% from 98.25%.
Shah said the raised money will also help bring in stronger institutional investors. This can help these banks support productive economic activity and expand their shareholder base.