Government Rules Out Any Move to Hike FDI Cap in PSU Banks to 49%, Says MoS Finance

In a written reply to the Lok Sabha, Minister of State for Finance Pankaj Chaudhary stated that there is “no proposal” before the government to increase the foreign direct investment (FDI) ceiling in public sector banks to 49%. The clarification comes after recent media reports suggested that policymakers were exploring a higher FDI cap to bolster capital inflows into state-run lenders.​

Under current rules, FDI in PSBs is capped at 20%, while private sector banks are allowed up to 74% foreign ownership under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. Chaudhary reiterated that FDI remains an important non-debt capital source that supports technology transfer, innovation, and job creation, but any change in limits must balance reform with financial stability and public ownership concerns.​

The minister also confirmed that no proposals on merger or consolidation of PSBs are under consideration at present, signalling policy continuity in the government’s approach to public sector banking reforms despite market speculation.​

Key Highlights

Government not considering proposal to raise FDI limit in PSBs to 49%.​

Current FDI caps: 20% in public sector banks; up to 74% in private sector banks.​

Clarification follows earlier media reports of a possible hike to attract more foreign capital.​

MoS Finance emphasizes FDI’s role as key non-debt capital but stresses need to preserve stability and majority government ownership.​

No proposal for merger or consolidation of PSBs is under government consideration at this time.​

Sources: PTI, Economic Times, Free Press Journal, parliamentary replies quoted in media reports.