New Delhi: The Government on Tuesday clarified that it has no plans to raise the foreign direct investment (FDI) limit in public sector banks (PSBs) from the current 20 percent to 49 percent, Minister of State for Finance Pankaj Chaudhary informed the Rajya Sabha.
Current FDI Norms in Banks
As per existing norms, the FDI limit in PSBs and private sector banks is 20 percent and 74 percent, respectively. In private banks, foreign investment up to 49 percent is allowed through the automatic route, while any investment beyond 49 percent and up to 74 percent requires government approval.
Chaudhary, replying to a written question, stated that there is no proposal under consideration to raise the FDI limit in PSBs to 49 percent.
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RBI Guidelines on Share Acquisition
The minister highlighted that under the Reserve Bank of India (RBI) Master Directions on “Acquisition and Holding of Shares or Voting Rights in Banking Companies,” any person acquiring 5 percent or more of a bank’s paid-up capital must seek prior RBI approval.
Government Shareholding in PSBs
Chaudhary also noted that the number of shares held by the Union Government in 12 PSBs has not declined since 2020. However, in some banks, the percentage of government shareholding has decreased due to the issuance of fresh shares to raise capital for business growth and regulatory compliance.
This capital raising, he said, helps strengthen bank balance sheets while reducing the fiscal burden on the government. Banks must also comply with the minimum public shareholding requirement of 25 percent under SEBI regulations and the Securities Contracts (Regulation) Rules, 1957.
Policy Framework for Central PSEs
Under the new Public Sector Enterprises (PSE) policy for Atmanirbhar Bharat issued by the Department of Investment and Public Asset Management (DIPAM), strategic recommendations regarding central PSEs—including banking, insurance, and financial services—will be made by NITI Aayog. Decisions on retaining government control, privatization, mergers, or subsidiarisation will be approved by an Alternative Mechanism authorized by the government.
Strengthening Banking Access in Rural Areas
The minister emphasized that the government has strengthened financial inclusion by ensuring that every inhabited village in the country has access to banking outlets, including bank branches, business correspondents (BCs), and India Post Payments Bank (IPPB) facilities, within a five-kilometre radius.
