Clarification on FDI Cap Hits PSU Banks: Indian Bank, PNB Lead the Sell-Off

New Delhi, December 3, 2025: A sharp decline in public sector bank stocks was seen in today’s trading session. The fall occurred after the clarification by the Ministry of Finance that there is no proposal to raise the limit of foreign direct investment in state owned banks. The clarification had reversed the positive wave created by previous reports that the government was considering increasing the FDI cap that was set at 20% to 49%. The index of Nifty PSU Bank had fallen over 3% to close at 8253.20 on Wednesday.

Government Refutes FDI Increase News

The sale-off followed closely the announcement by Minister of State in Finance Pankaj Chaudhary in a written answer to the Rajya Sabha that the government has not plan to increase the FDI limit in public sector banks. He repeated that the current limit was at 20% with no proposed changes. In October, there were reports that the government was considering a proposal to permit up to 49% direct foreign investment in the PSU banks. 

Nifty PSU Bank Index Stretches the Downtrend

This will be the second day of losses to the Nifty PSU Bank index. On the day before the index had declined following the clarification by the minister in the Lok Sabha that the state-owned banks were not in need of consolidation or merger. 

Indian Bank and PNB Lead the Decline

The highest decline in the PSU Bank index was recorded in Indian Bank where its shares declined more than 6% to approximately ₹807.65. Punjab national bank was next to experience a loss of over 4%. Other key PSUs such as Bank of India, Canara Bank and Bank of Baroda recorded fall of over 3%. Punjab and Sind Bank, Central bank of India, Union Bank of India and UCO bank were down by over 2% each. State Bank of India dropped by almost 2% and Indian Overseas Bank and Bank of Maharashtra dropped by more than 1%.

Existing Shareholding and Regulatory Environment

Chaudhary recorded that even with a decrease in the shareholding percentage by the government in certain banks, the shareholding held by the government has not been decreasing since 2020. He further clarified that the whole PSU banks should abide by the required minimum 25% conditions of public shareholding as required so as to have a balanced ownership structure.

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