What is selling a minor part of the equity of PSU's called as?

Disinvestment

The correct answer is option 2: Disinvestment

Disinvestment means selling a stake in a company, subsidiary or other investments. Businesses and governments resort to divestment generally as a way to exit a particular industry, or raise money.

Privatization involves a change in ownership, whereas disinvestment involves dilution of ownership. In privatization, the government sell more than 50% of its shareholding, while in case of disinvestment shareholding less than 50% is sold by the government.