FDI Boost: Government Eyes 49% Cap in Public Sector Banks

The Finance Ministry is considering raising the Foreign Direct Investment (FDI) cap in public sector banks from 20% to 49% to bolster their capital. While private banks allow up to 74% FDI, public sector banks may see an increase in capital mobilization efforts to aid growth.

The Finance Ministry is contemplating an increase in the Foreign Direct Investment (FDI) cap for public sector banks from the current threshold of 20% to 49%. This initiative aims to strengthen the banks' capital base and support their growth trajectory.

The deliberations are ongoing, with the Financial Services Secretary, M Nagaraju, highlighting ongoing inter-ministerial consultations on the matter. Currently, private sector banks enjoy an FDI cap of 74%, with the first 49% obtainable via the automatic route.

Nagaraju revealed that public sector banks have raised approximately Rs 45,000 crore through various channels, including qualified institutional placements. Expectations are set for further mobilization of Rs 45,000-50,000 crore in the next fiscal year, fostering a promising outlook for asset size doubling in coming years.

(With inputs from agencies.)