The government has no plans to raise the FDI limit in public sector banks, MoS Finance Pankaj Chaudhary stated in Parliament on Tuesday. Following the announcement, PSU bank shares tumbled on Wednesday, with Indian Bank falling 6%, while Punjab National Bank, Bank of India, Canara Bank, Bank of Baroda, Central Bank of India, Union Bank, Punjab & Sind Bank, and UCO Bank declined up to 2% each. The Nifty PSU Bank index dropped nearly 3% intraday to 8,264 points, down about 5% from its recent high of 8,665 points.
When asked in the Rajya Sabha about increasing the FDI cap from 20% to 49% in PSU banks, Chaudhary confirmed no such proposal exists. As per RBI’s Master Directions on banking shareholding, investors need RBI approval to hold over 5% in PSU banks, and banks must comply with SEBI’s minimum public shareholding of 25%. Currently, FDI is allowed up to 20% in PSU banks and up to 49% in private banks automatically, and 74% with regulatory approval.
Chaudhary added that the government’s shareholding in the 12 PSU banks has remained constant in absolute terms since 2020, though the percentage may have reduced due to capital-raising efforts. Such fundraising helps banks grow, meet regulatory norms, and reduce fiscal pressure on the government.
