The Union Government has no plan to increase the foreign direct investment (FDI) limit in public sector banks. The current limit stands at 20 percent. There was a perception in the banking sector that the Centre might consider raising the FDI limit to 49 percent. The Minister of State for Finance, Pankaj Choudhary, clarified it in the Parliament on Tuesday. He said that the Centre is not considering any such proposal to raise the FDI limit in Public Sector Banks (PSBs).
Choudhary’s statement came in reply to a written question in the Rajya Sabha on whether the government has proposed raising the FDI limit in PSBs to 49 percent. It should be noted that the government continues to hold its share in 12 public sector banks since 2020.
The FDI limit in PSBs and private sector banks is 20 percent and 74 percent, respectively. In the case of private sector banks, up to 49 percent of FDI is through the automatic route, and beyond 49 percent and up to 74 percent, the government route is applicable.
Chaudhary also clearly said that the number of shares held by the Union Government in 12 public sector banks (PSBs) has not declined since 2020. However, he added, the respective percentage of shareholding of the Union Government has declined in some of these banks due to the raising of capital through the issuance of fresh shares by banks.
According to the minister, fresh capital is raised by the banks to meet their capital requirement for business growth and maintaining regulatory requirements. He added that such capital raising reduces the fiscal burden on the government and strengthens the balance sheet of banks. Further, the minister said, there is a minimum public shareholding requirement of 25 percent, which banks have to ensure compliance of under the rule.
As per the New Public Sector Enterprises policy for Atmanirbhar Bharat, recommendations are to be made by NITI Aayog with regard to Central PSEs under strategic sectors, which includes the Banking, Insurance, and Financial Services Sector.
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