Divestment Plan of several PSBs and LIC on table

The Indian government plans to reduce its stake in the Life Insurance Corp. of India ( !LIC ) and several public sector banks (PSBs) beyond the minimum public shareholding requirements set by SEBI. The government aims to hire merchant bankers for an initial three-year term to manage these share sales over time, with the goal of raising funds and capitalizing on favorable market conditions. Despite the stake sales, the government will retain majority ownership and management control. Key Divestment Plans LIC: The government, which currently holds a 96.5% stake in LIC, plans to reach SEBI's 10% minimum public shareholding requirement by 2027 and may go beyond that later. The initial deadline of May 2024 was extended to May 16, 2027. Public Sector Banks (PSBs): Five PSBs—

, , Punjab & Sind Bank, , and —must reduce the government's ownership below 75% by August 2026. Bank of Maharashtra is the only one expected to meet this deadline, with the others likely to seek an extension. Context and Market Opportunity PSB Performance: The government sees an opportunity to capitalize on the strong performance of PSBs, which cumulatively logged a record profit of ₹44,218 crore in the June quarter. LIC Performance: LIC's stock jumped 4% recently after reporting a 150-basis-point increase in its value of new business (VNB) margin, in a seasonally weak quarter. Potential Capital Raising: Some PSBs, including UCO Bank, Punjab & Sind Bank, and Indian Overseas Bank, may sell shares to financial institutions in FY26 to raise capital and increase public shareholding to the required minimum levels.