A report said that the Indian government is thinking about letting more foreign investment into public sector banks (PSBs). Right now, foreign investors can own up to 20% of a Public Sector Bank. The government now wants to increase this limit to allow more foreign capital to flow in. But the government still wants to keep at least 51% ownership, so the banks stay publicly controlled. In private banks, foreign ownership can go up to 74%, which is much higher.
Government is also thinking of using a “golden share” system — a special share that gives the government decision-making power, even if its ownership percentage drops in the future.
Why is the Government Doing This?
PSBs are doing much better and have recovered from earlier problems and are now profitable and strong. Bad loans (NPAs) are much lower now and profits and dividends have increased. Here are the few points why government plans to increase the foreign investment.
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The government wants PSBs to become more competitive, innovative, and support India’s economic growth — especially with big goals like Viksit Bharat 2047 (a vision of a developed India by 2047).
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There is a lot of interest from foreign investors because India is growing fast and investing heavily in things like infrastructure.
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To strengthen PSBs as These banks need more money (capital) to grow, lend more, and compete better. By allowing more foreign investment, the banks can raise funds from international investors. With more capital, PSBs can modernize, improve their services, and compete with private and international banks.
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PSBs have shown strong performance recently but still, India’s bank credit-to-GDP ratio (how much banks lend compared to the size of the economy) is low. This means there’s still room for banks to grow and lend more. More foreign investment = more money for growth
This news made investors excited, which caused the shares of many PSU banks to rise. Here are some of the top gaining PSU banks today (September 24, 2025), based on the latest reports:
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Indian Bank — up nearly 3%
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Canara Bank — up close to 2%
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Indian Overseas Bank (IOB) — up 1%
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Bank of Baroda (BoB) — up 1%
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Bank of India — likewise up about 1%
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India wants to allow more foreign money into public banks so they can become stronger and more competitive but without giving up government control. This move aims to give banks more money to grow, help the economy, and compete globally.
Also Read: Government May Sell Up to 20% Stake in 5 PSU Banks
Government Directs 15 PSU Banks to List Subsidiaries, Strengthens IPO
