Raising of capital by banks and NBFCs through the qualified institutional placements (QIPs) route witnessed a 46% jump to Rs 7,456 crore in the first quarter of the calendar year 2025, compared with Rs 5,100 crore in the corresponding period last year.
Banks dominated the fundraising both in terms of value and volume as they mobilised nearly Rs 6,100 crore in the January-March period. Experts say the surge in banks’ fundraising through QIPs was largely driven by the need to meet the Sebi’s requirement for a minimum public shareholding of 25%.
“The almost 50% increase in capital raised in Q1CY25 over the year-ago period reflects the government’s desire to meet the Sebi-mandated minimum public float requirements for the state-owned banks,” said Nirav Shah, managing director, Equirus Capital. “With DIPAM’s (Department of Investment and Public Asset Management) plan to launch offers for sale of shares to the general public to increase retail ownership in state-owned banks, we feel that the trend of increased capital raising will sustain through CY25.”
The capital mobilisation by state-owned banks is a strong endorsement by markets of the marked improvement in their financials, both in terms of margins and non-performing loans, Shah said.
Indian Overseas Bank, Central Bank of India, Punjab & Sind Bank and UCO Bank have government shareholding in excess of 90%. Under the Sebi regulations, banks are required to bring down the government shareholding to a maximum of 75%. QIPs allow listed companies, including banks, to issue equity shares or convertible securities to qualified institutional buyers (QIBs).
UCO Bank raised Rs 2,000 crore, the highest amount among banks, via QIP in March. Central Bank of India and Indian Overseas Bank mopped up Rs 1,500 crore and Rs 1,437 crore, respectively, by selling shares to institutional investors.
“By bolstering banks’ capital base, proceeds from these QIPs will empower them to accelerate lending and better serve the financing needs of their customers,” said the head of treasury of a public sector bank.
Following QIPs, the government’s shareholding in these public sector banks has seen a notable decline by March 2025. In Indian Overseas Bank, the stake dropped to 94.65% from 96.38% in December 2024. In Central Bank of India, the government’s holding fell to 89.27% from 93.08% over the same period. UCO Bank saw a reduction in government stake to 90.95%, from 95.39%. For Punjab & Sind Bank, the shareholding declined to 93.85% from 98.25%.
“The funds raised through qualified institutional placements will also help broaden the shareholder base of these banks by getting in strong institutional investors. It will also help these institutions to play a strong role in supporting productive economic activity,” said Shah.