Govt envisages to hike foreign investment cap for public sector banks to 49%

The central government as per official resources is likely to considering the inter-ministerial discussions to increase the foreign direct investment (FDI) cap in state-owned banks from the current ratio of 20% to 49%, as per the financial services secretary M. Nagaraju mentioned. However, in December 2025, there was official denial for such proposal citing to keep the limit at 20% only to avoid major frictions in the financial structure.

Further, the government is currently focusing on strategic reforms of the public sector banks to make it more globally competitive and potentially capable for market value. According to recent government activity specially in Budget 2026, the center might focus upon to propose a Banking Governance Bill to enhance reforms, and hiking FDI limit. However, this is still not confirmed as of official announcement.

On contrary, the FDI limit for the private banks has been capped at 74% with 49% through automatic route and investment beyond 74% requires government approval. It includes FDI, FII, NRI, and other foreign holdings.