India Weighs Raising FDI Cap in State-Run Banks to 49%
India is conducting inter-ministerial consultations to raise the foreign direct investment (FDI) limit in state-run banks to 49% from the current 20%, Financial Services Secretary M Nagaraju said. The move aims to help public sector lenders access greater capital as foreign interest in India’s banking sector grows. Current rules allow up to 74% foreign investment in private banks, though any single foreign institution is capped at 15% ownership unless exempted by the Reserve Bank of India.
Rising global appetite for Indian banking assets is already visible, including Dubai-based Emirates NBD agreeing to a $3 billion deal to acquire a 60% stake in private lender RBL Bank. Nagaraju noted that increasing the FDI ceiling would strengthen state-run banks’ capital base in the coming years. He was speaking in New Delhi a day after Finance Minister Nirmala Sitharaman presented the Union Budget.
Separately, public sector banks plan to raise around ₹500 billion through qualified institutional placements (QIPs) in FY2026–27, up from ₹450 billion this fiscal year. The government may also offload part of its stake in Life Insurance Corporation of India next year. In addition, financial bids for IDBI Bank are expected this month, with the government and LIC together planning to sell a 60.7% stake in the lender, which was rescued in 2019 following a surge in bad loans.
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