FDI Limit In PSU Banks May Rise To 49%, Government Prepares Draft Cabinet Note As RBI Backs Proposal

New Delhi: The Centre is reportedly considering increasing the foreign direct investment (FDI) limit in public sector banks (PSBs) from the existing 20 percent to 49 percent, a move aimed at attracting foreign capital into India's banking sector.

Finance Ministry Seeks Feedback

According to multiple reports, the Finance Ministry has prepared a draft Cabinet note proposing the higher FDI ceiling and sought comments from other ministries before moving ahead with the proposal.

The Reserve Bank of India (RBI) has reportedly supported the move and recently recommended that the government consider raising the investment limit at the earliest.

However, neither the Finance Ministry nor the RBI has officially announced any decision.

Current FDI Limits In Banks

Currently, foreign investment of up to 74 percent is permitted in private sector banks, while public sector banks have a significantly lower ceiling of 20 percent.

Among India's 12 public sector banks, State Bank of India (SBI) has the highest reported foreign investment holding at 11.07 percent, followed by Canara Bank at 10.55 percent.

The proposed increase could create additional opportunities for foreign investors, subject to regulatory approvals and applicable ownership restrictions.

India's FDI Inflows Rise 6 percent

Meanwhile, India's FDI equity inflows increased 6 percent to USD 19.81 billion during April-June FY27, compared with USD 18.62 billion in the corresponding quarter last year, according to DPIIT data.

Monthly inflows reached USD 12.1 billion in April, declined to USD 2.8 billion in May and recovered to USD 4.91 billion in June.

Services Sector Leads Investments

The services sector attracted the highest FDI equity inflows at USD 7.04 billion, followed by computer software and hardware at USD 2.84 billion and trading at USD 1.92 billion.

Non-conventional energy received USD 1.24 billion, while automobiles attracted USD 622 million.

Total FDI, including equity inflows, reinvested earnings and other capital, increased approximately 22 percent to USD 30.65 billion.

Tamil Nadu topped the state-wise investment chart with USD 5.95 billion, followed by Maharashtra at USD 4.22 billion and Delhi at USD 2.67 billion.