The Central government is considering selling minority stakes in four state-run banks to comply with public shareholding norms mandated by the country's markets regulator, a government source told Reuters.

The finance ministry is likely to seek approval of the cabinet in the coming months to dilute the stake in Central Bank of India, Indian Overseas Bank, UCO Bank, and Punjab and Sind Bank, the source said.

The Central government owns more than 93 per cent in Central Bank of India, 96.4 per cent in Indian Overseas Bank, 95.4 per cent in UCO Bank and 98.3 per cent in Punjab and Sind Bank as of end-September, according to data on the BSE's website.

The plan under consideration is to sell the stake through an offer for sale in the open market, the source said.

Shares of the banks rose between 3 per cent and 4 per cent following the report.

The Securities and Exchange Board of India (SEBI) requires listed companies to maintain a 25 per cent public shareholding, but has exempted government-owned firms from meeting these norms till August 2026.

The source did not comment on whether the government will be able to meet the regulator's deadline or whether it would seek a further extension.

The official said the timing and the quantum of the sale would be decided based on market conditions. The official did not want to be named as he is not authorised to speak to the media.

The finance ministry did not immediately respond to a request for comment.

In the past, public sector banks have launched qualified institutional placements (QIP) to raise capital which has in turn lowered the government's stake in state-run banks.

Punjab National Bank raised ₹5,000 crore through a QIP in September, while Bank of Maharashtra raised ₹3,500 crore in October.

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