Finance ministry mulls raising FDI limit in public sector banks to 49%

The Finance Ministry is considering raising the foreign direct investment (FDI) limit in public sector banks (PSBs) to 49 per cent from the current 20 per cent to strengthen their capital base, PTI reported.

“We are still considering, and inter-ministerial consultation is on for raising FDI cap to 49 per cent,” Financial Services Secretary M Nagaraju said.




At present, FDI in PSBs is capped at 20 per cent, while private sector banks can receive up to 74 per cent foreign investment. In private banks, FDI up to 49 per cent is permitted through the automatic route, while investment beyond 49 per cent and up to 74 per cent requires government approval.

The move is being evaluated as part of broader efforts to support capital needs of state-run lenders amid growth expansion.

Nagaraju said the Union government’s shareholding in 12 PSBs has not declined in terms of number of shares since 2020, although percentage shareholding has reduced in some banks due to capital raising through fresh share issuance.

He said PSBs collectively raised about Rs 45,000 crore through various routes, including qualified institutional placement (QIP) and offer for sale.

Banks are expected to mobilise about Rs 45,000-50,000 crore in the next financial year as well, in line with their growth trajectory.

Providing a growth outlook, he said public sector banks are expected to double their asset size over the next five years. The combined assets of PSBs stood at about Rs 261 lakh crore at the end of September 2025.

On the strategic disinvestment of IDBI Bank, the secretary said financial bids are likely to be invited this month or next month.

In October 2022, the government and LIC had invited expressions of interest (EoI) from investors for privatisation of IDBI Bank through sale of a total 60.72 per cent stake, including 30.48 per cent held by the government and 30.24 per cent by LIC.

DIPAM received multiple EoIs in January 2023. Prospective buyers have received security clearance from the Ministry of Home Affairs and have been declared fit and proper after evaluation by the Reserve Bank of India.

On sector consolidation, Nagaraju said India would need three to four large banks.

“We need 3-4 big banks for a country of our size,” he said.