The government is not considering any proposal to raise the foreign direct investment (FDI) limit in public sector banks (PSBs) from 20% to 49%, Minister of State for Finance Pankaj Chaudhary informed the Rajya Sabha on Tuesday.
What is the current FDI cap?
Currently, FDI caps stand at 20% for PSBs and 74% for private banks, with up to 49% allowed automatically in the latter. Any acquisition of 5% or more in a bank requires prior Reserve Bank of Indiaapproval.
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Chaudhary said the number of shares held by the Centre in 12 PSBs has not declined since 2020, although the government’s shareholding percentage has reduced in some cases due to banks issuing fresh capital. Such issuances support growth, meet regulatory norms, and ease fiscal pressure. Banks must also maintain a 25% minimum public shareholding.
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Chaudhary explains the rationale behind the new public sector enterprise (PSE) policy
As per the new public sector enterprise (PSE) policy issued by the department of investment and public asset management, he said, “recommendations shall be made by NITI Aayogwith regard to central PSEs under strategic sectors, which includes the banking, insurance and financial services Sector, and recommendations shall be considered and central PSEs to be, inter alia, retained under government control or considered for privatisation or merger or subsidiarisation with another PSE shall be approved by an alternative mechanism that has been approved by the government.” |
