India Considers Raising PSB FDI to 49%
Analysis based on 7 articles · First reported Feb 02, 2026 · Last updated Feb 03, 2026
The proposed increase in FDI limits for public sector banks is expected to boost their capital base and attract significant foreign investment, leading to improved financial stability and growth prospects for the Indian banking sector. This move could also facilitate the creation of larger banks, better equipped to support India's economic expansion.
The India===Ministry of Finance (India) is considering raising the foreign direct investment (FDI) limit in public sector banks (PSBs) from the current 20% to 49%. This initiative aims to strengthen the capital base of PSBs and attract more foreign investors. Financial Services Secretary M. Nagaraju confirmed that inter-ministerial consultations are underway. Currently, private sector banks can receive up to 74% FDI, with up to 49% via the automatic route. The government's shareholding in PSBs has remained high, but the percentage has declined in some due to fresh share issuance for capital raising. PSBs have collectively raised approximately ₹45,000 crore and are expected to mobilize a similar amount next fiscal year, with assets projected to double in five years. The strategic sale of Life Insurance Corporation of India===IDBI Bank is also progressing, with financial bids anticipated soon. The government also plans to divest a portion of its stake in Life Insurance Corporation (LIC). The broader goal is to create 3-4 large banks in India to support the country's economic size and growth.
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