Foreign interests in SBI, BoB, 3 more PSBs down, government says no plan to increase cap

Pankaj Chaudhary, Minister of State for Finance

“No sir,” Union Minister of State for Finance Pankaj Chaudhary said in a written reply when asked whether the government has proposed increasing the FDI limit in PSBs to 49 percent. He also said that 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 flows through the automatic route, and beyond that, the government route applies.

Further, “as per the Reserve Bank of India’s Master Directions on ‘Acquisition and ownership of shares or voting rights in banking companies’, the acquisition of shares of a bank, resulting in a person owning or controlling 5 percent or more of the paid-up capital of the bank, requires prior approval of the RBI,” he said. Data accompanying this response showed that only two out of 12 PSBs have foreign shares in double digits. While foreign direct investment has increased in seven PSBs, major banks such as SBI and BOB have recorded a decline.

Divestment of PSB?

Replying to another question, Chaudhary said in a written reply that currently “no proposal on merger or disinvestment of PSBs is under consideration by the government.” The issue recently made headlines when Finance Minister Nirmala Sitharaman said last month that India needs more “big banks” and that efforts are underway to achieve that goal, including the possibility of consolidating some state-owned banks. In 2020, the government merged 27 banks into twelve to form larger entities.

Meanwhile, Chaudhary informed that the gross Non-Performing Assets (NPAs) ratio in PSBs fell from 9.27 per cent in March 2016 to 2.58 per cent in March 2025 and further to 2.51 per cent in June. Similarly, the slippage ratio (new growth of NPAs as a percentage of standard advances) has fallen to 1 percent in March from 7.5 percent in March 2016. 2025, and further to 0.9 percent in June.

Speaking about the measures to reduce NPA, Chaudhary said there has been a change in credit culture, with the Insolvency and Bankruptcy Code (IBC) fundamentally changing the relationship between creditors and borrowers, taking control of the defaulting company away from promoters/owners, and excluding willful defaulters from the resolution process. To make the process more stringent, the personal guarantee for corporate debtors has also been brought under the ambit of IBC.

“The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Recovery of Debt and Bankruptcy Act have been amended to make them more effective. The financial jurisdiction of the Debt Recovery Tribunal (DRTs) was increased from ₹10 lakh to ₹20 lakh to enable the DRTs to focus on high value cases resulting in higher recovery for the banks and financial institutions, Chaudhary said.

Published on December 2, 2025