UCO Bank has already written to LIC for close to Rs 1,000 crore equity infusion, according to A K Goel, managing director & CEO, UCO Bank. LIC already has about four per cent stake in the bank. The bank is looking to raise close to Rs 4,500-5,000 crore this financial year.
Allahabad Bank, too, is in talks with LIC for an equity infusion, according to a senior official of the bank. The bank has time till October 2020 to meet the Sebi norms.
Most of the banks are planning to go for a qualified institutional placement (QIP) to reduce the stake, and LIC would be a major subscriber of the issues, said a banker in a PSB.
One of the reasons that LIC could be a major investor in the banks relates to the fact that most banks might not find corporate investors in the current market situation. Further, earlier, the State Bank of India would also be a subscriber to many QIPs by other PSBs, which is not the case now, said a senior banker.
United Bank of India, too, is planning to approach LIC for equity, Ashok Kumar Pradhan, MD and CEO of United Bank of India confirmed.
According to a senior official in a PSB, Sebi has already been giving dispensation to banks to extend the timeline to meet the free float norm on a case by case basis.
The options in front of banks to reduce government equity include instruments such as QIP, follow on public offer (FPO) or rights issue, among others. However, for FPO or rights issues, the market conditions might not be favorable now, leaving QIP as the only option.
Also, with the further proposed round of capital infusion of Rs 70,000 crore by the government in public sector banks -- as a measure to boost the economy, the government stake in the banks might go up further, leaving little room for future infusion unless government stake is reduced.