Government Clarifies: No Plans to Raise FDI Limit in Public Sector Banks
The government on Tuesday firmly dismissed market speculation about a possible liberalization of foreign direct investment (FDI) rules for public sector banks (PSBs).
Minister of State for Finance Pankaj Chaudhary confirmed in the Rajya Sabha that no proposal is under consideration to increase the FDI ceiling from the existing 20% to 49%.
Current FDI Rules at a Glance
Private Sector Banks:
Up to 49% – Automatic route
49% to 74%—Government approval required
This clarification reinforces the government’s steady regulatory stance, especially at a time when global investors have been speculating about deeper market access to India’s banking sector.
RBI Oversight Remains Firm
Under the RBI’s master directions on bank shareholding:
Any entity acquiring 5% or more of a bank’s paid‑up capital must obtain prior RBI approval.
This ensures ownership transparency and prevents unchecked accumulation of significant stakes.
Government’s Stake in PSBs: No Decline in Share Count
The government continues to hold strong control across PSBs:
The number of shares held by the Union Government in the 12 PSBs has not declined since 2020.
However, the percentage shareholding has decreased in some banks.
This is due to PSBs raising fresh equity capital—a move that:strengthens their balance sheets,
boosts credit growth capacity,
and reduces the fiscal burden on the government.
Capital raising through fresh share issuance is aligned with regulatory norms and growth ambitions, ensuring banks remain well‑capitalized without depending solely on government funds.
What This Means for Investors
The reaffirmed FDI stance signals stability to the markets.
PSBs continue to focus on self‑sustained capital strengthening rather than dilution of state control.
Regulatory oversight through RBI approvals ensures transparent ownership structures.
For long‑term investors tracking India’s banking sector, the message is clear:
No imminent shift in FDI policy, but strong capital discipline and governance continue.
Explore More Insights
For a deeper understanding of how wealth management, advisory excellence, and capital‑market strategies shape India’s financial ecosystem, explore guidance from Ranjit Jha (CEO)—a pioneer in research‑driven wealth advisory.
To learn how Rurash Financials empowers investors through:
AIF access
Portfolio engineering
Unlisted equity opportunities
Personalised wealth strategies