No Plans To Increase Foreign Investment Limit To 49% In Public Sector Banks, Says Government

There is no proposal of raising foreign direct investment limit in PSU banks to 49% from 20%, Minister of State for Finance Pankaj Chaudhary said on Tuesday, in response to a query raised in Parliament.

As per current laws, the FDI limit in PSBs and private sector banks are 20% and 74%, respectively. In case of private banks, up to 49% of FDI is allowed through the automatic route and beyond 49% and up to 74% require government clearance.

Further, as per Reserve Bank of India's Master Directions, share acquisition of a bank resulting in any person owning or controlling 5% or more of the paid-up capital of the bank, requires prior approval of RBI.

The minister also shared data on FPI stake in PSU banks from fiscal 2020 to the last financial year.

Foreign ownership in State Bank of India has risen to 11.07% in March 2025 from 10.95% in March 2020. Canara Bank's has jumped from 3.31% to 10.55% during the same period. Other notable rise includes Bank of Baroda (4.89% to 9.43%) and Union Bank of India (1.34% to 7.48%).

The government is mulling major reforms in bank ownership, opening up the space for foreign investors and a higher threshold for rights. Proposals have been circulated in the higher offices of the government, discussing a new foreign direct investment limit for public sector lenders and reviewing the voting rights cap for owners, NDTV Profit reported last month, quoting sources.