PSU Bank Stocks Rise as Centre Mulls 49% Foreign Investment Cap

Market Performance

Public sector bank stocks continued their upward momentum on Monday as optimism built around a major policy development.

The Nifty PSU Bank index extended its rally for the second straight session, rising more than 1.6% in early trade before trimming some gains.

By 9:50 a.m., the index was up 0.7% at 8,049.05, after touching an intraday high of 8,118.95. The move reflects growing investor confidence amid buzz that the government may raise foreign investment limits in state-run lenders.

Main News: Government May Raise FDI Limit in PSU Banks

A Reuters report indicated that India’s Ministry of Finance is considering a plan to increase the foreign direct investment (FDI) limit in PSU banks to 49%, up from the current cap of 20%.

The proposal is reportedly being discussed with the Reserve Bank of India (RBI) and could pave the way for higher overseas participation in the country’s state-owned banking sector.

According to the report, discussions between the government and the RBI have been ongoing for the past few months.

If implemented, this move could help PSU banks access fresh global capital at a time when investor appetite for Indian banking stocks is already strong. The change would also align PSU banks more closely with private sector peers that already enjoy higher FDI caps.

Company Details: PSU Bank Stocks in Focus

The market reacted swiftly to the report, with most major PSU bank stocks trading in the green.

Here’s how key names performed in early trade:

• Indian Bank share price rose nearly 1.5% to ₹838.05 apiece.
• Union Bank of India gained more than 1%.
• Punjab National Bank (PNB) and Bank of Maharashtra added close to 1% each.
• State Bank of India (SBI) and Bank of India, and Bank of Baroda, Canara Bank, UCO Bank, and Punjab & Sind Bank (PSB) were also trading with modest gains.
• Meanwhile, Central Bank of India and Indian Overseas Bank were the only laggards, edging slightly lower.

This broad-based uptick lifted the Nifty PSU Bank index, extending its two-day winning streak. The index had surged over 3% in the previous session to hit a high of 8,053.40, before closing more than 2% higher at 7,990.65 on October 27.

Policy Context and Market Sentiment

The possibility of a higher foreign investment cap signals a structural shift for the Indian banking ecosystem.

It underscores the government’s intent to make state-owned banks more competitive and better capitalized, especially as credit demand remains strong across retail and corporate segments.

The renewed global interest in India’s financial sector has been visible in recent months, with multiple large investments in private lenders.

For instance, international investors have shown sustained confidence through strategic stake purchases, reinforcing India’s appeal as one of the world’s fastest-growing banking markets.

Summary

The latest rally in PSU bank stocks highlights how swiftly market sentiment can turn positive on strong policy signals.

A move to raise the foreign investment cap to 49% could be a game-changer for the sector, enabling public sector banks to attract deeper institutional interest and strengthen their capital base.

For now, the market narrative remains upbeat, with Nifty PSU Bank, SBI, PNB, Canara Bank, and Union Bank of India staying in focus.

Investors will be watching closely for any official announcement from the government or the RBI in the coming weeks.