The government is not considering a proposal to increase the FDI limit for PSU banks, MoS Finance Pankaj Chaudhary said in the Parliament on Tuesday.
In response, PSU Bank stocks crashed on Wednesday, with Indian Bank leading the declines with a 6% fall in share price. Punjab National Bank, Bank of India, Canara Bank, Bank of Baroda, Central Bank of India, Union Bank, Punjab & Sind Bank and UCO Bank were down up to 2% each.
The Nifty PSU Bank index fell as much as 3% to an intraday low of 8,264 points—down nearly 5% from its recent high of 8,665 points.
FDI limit in PSU banks
In response to a written question in the Rajya Sabha on whether the Centre has proposed increasing the FDI limit in public sector banks to 49% from 20% at present, Chaudhary replied in the negative.
According to the Reserve Bank of India’s Master Directions on ‘Acquisition and Holding of Shares or Voting Rights in Banking Companies’, an investor has to get RBI approval to raise its stake beyond 5% in a public sector bank, he said. Banks are also required to ensure compliance with SEBI’s minimum public shareholding rule of 25%.
At present, the government allows up to 20% FDI in public sector banks and up to 49% in private banks via the automatic route and up to 74% with regulatory approvals from the government and the central bank.
Govt stake in PSU banks
Replying to another question, Chaudhary said the government’s number of shares in India’s 12 public sector banks has not declined since 2020, but the stake in percentage terms may have reduced due to fundraising moves.
Banks raise capital for business growth and maintaining regulatory norms, he said, adding that such fundraising reduces fiscal burden on the government and strengthen the balance sheet of banks.
With inputs from PTI.
