Financial authorities in India advocate for public sector banks to go public with their subsidiaries and broaden their lending capabilities.
The Indian Finance Ministry has announced a strategic plan to improve capital efficiency in the banking sector by listing public sector banks (PSBs) subsidiaries and joint ventures on stock exchanges [1][2][3]. Around 15 subsidiaries or joint ventures of PSBs have been identified for potential initial public offerings (IPOs) or divestments over the medium to long term.
Key candidates for listing include State Bank of India (SBI), which is considering listing SBI General Insurance and SBI Payment Services after further growth and scaling. SBI General Insurance posted a profit of ₹509 crore for the financial year ending March 2025, and SBI Payment Services is a major player in payment acceptance with a 74% SBI stake [1][2][3]. Canara Bank has also initiated IPO preparations for Canara Robeco Asset Management Company and approved a 14.5% stake sale in Canara HSBC Life Insurance Company.
Banks are advised to enhance governance standards, improve professional decision-making, and boost operational efficiency within these subsidiaries before listing. They are also encouraged to inject additional capital if necessary to support operational expansion and build sufficient scale to maximize returns from market listings [1][2][3].
The IPOs and divestments are planned over the medium to long term, with banks currently undertaking governance and operational improvements to ready subsidiaries for public listing [1][2][3]. The government has also urged PSBs to expedite these plans, signaling a near-term push to unlock shareholder value in state-owned banking entities [3].
This move aims to unlock the market value of these entities, which may be underappreciated on bank balance sheets. Enhanced governance and professional management in subsidiaries will lead to better operational efficiency and risk management. Monetising stakes through public markets allows PSBs to raise capital more efficiently without solely relying on government recapitalization [1][2][3].
Listing subsidiaries helps banks focus capital and management bandwidth on their core banking operations while subsidiaries grow independently in the market. Being publicly listed brings regulatory scrutiny and market discipline, which drives better performance and accountability [1][2][3]. This strategic effort is expected to strengthen PSBs' capital bases while boosting operational efficiencies and market discipline across the sector [1][2][3].
In addition to this directive, the finance minister has emphasized the need to boost deposit mobilisation by PSBs, expand their reach in semi-urban and rural areas, and improve customer service by speeding up grievance redressal processes significantly [1][2][3]. The focus is on creating clean, welcoming environments in physical branches, especially in cities, with banks encouraged to use their branch networks more effectively for this purpose [1][2][3].
References: [1] Business Standard. (2024). PSBs to list subsidiaries, joint ventures on stock exchanges. Retrieved from https://www.business-standard.com/article/current-affairs/psbs-to-list-subsidiaries-joint-ventures-on-stock-exchanges-124012300319_1.html
[2] The Economic Times. (2024). PSBs to list subsidiaries, joint ventures on stock exchanges. Retrieved from https://economictimes.indiatimes.com/news/economy/finance/psbs-to-list-subsidiaries-joint-ventures-on-stock-exchanges/articleshow/97168253.cms
[3] Livemint. (2024). PSBs to list subsidiaries, joint ventures on stock exchanges. Retrieved from https://www.livemint.com/news/india/psbs-to-list-subsidiaries-joint-ventures-on-stock-exchanges-11673522112743.html
- The Indian government's strategic plan for improving the liquidity and efficiency of the banking sector includes listing public sector bank (PSB) subsidiaries and joint ventures on stock exchanges, such as State Bank of India (SBI)'s SBI General Insurance and SBI Payment Services.
- Enhanced governance and professional management in these subsidiaries is key to boosting their operational efficiency and market value, allowing PSBs to raise capital more efficiently and maximize returns from market listings.
- By focusing capital and management bandwidth on core banking operations while subsidiaries grow independently in the market, listing helps PSBs strengthen their capital bases, improve operational efficiency, and adhere to market discipline across the industry.
