MUMBAI, October 28, 2025 (10:43 GMT+5:30) – PSU Bank Stocks Rally – Shares of public sector undertaking (PSU) banks witnessed a broad-based upmove in early trade on Monday, propelled by a media report suggesting the government is considering a significant increase in the foreign investment limit for state-run lenders.
The Nifty PSU Bank index surged as much as 1.6 percent, reflecting the buoyant sentiment across the sector.
Report Triggers Bullish Sentiment
The rally was triggered by a Reuters report dated October 27, which stated that the Indian government is planning to more than double the foreign investment cap in PSU banks to 49 percent. Currently, the limit for foreign portfolio investment (FPI) in most state-run banks is at 20 percent.
Citing people familiar with the matter, the report indicated that the Ministry of Finance has been in discussions with the Reserve Bank of India (RBI) over the past couple of months regarding this proposal. The move is seen as a strategic step to help PSU banks attract more capital from overseas investors. Moneycontrol could not independently verify the report.
Market Performance
The Nifty PSU Bank index hit an intraday high of 8,118.95, before paring some of the sharp gains. By 9:50 am, the index was trading at 8,049.05, up 0.7 percent. This marks the second consecutive session of gains for the index, which had closed over 2 percent higher in the previous session.
Among the top gainers were:
- Indian Bank: Shares rose nearly 1.5% to Rs 838.05 apiece.
- Union Bank of India: Gained over 1 percent.
- Bank of Maharashtra and Punjab National Bank (PNB): Advanced nearly 1 percent each.
Other major PSU lenders, including State Bank of India (SBI), Bank of Baroda, and Canara Bank, were also trading with marginal gains. Central Bank of India and Indian Overseas Bank were the few exceptions, trading marginally in the red.
Broader Context of Foreign Investment
The report comes at a time when foreign investors have shown a growing appetite for Indian banking assets, though primarily in the private sector. In a landmark deal earlier this year, Japan’s SMBC Group led a consortium to acquire a 20 percent stake in Yes Bank for $1.6 billion.
More recently, global private equity giant Blackstone announced an investment of approximately $705 million in Federal Bank for a 9.9 percent stake, making it the bank’s largest shareholder. A potential hike in the FPI limit could open similar avenues for capital infusion into public sector banks.
Market experts suggest that such a policy change would be a significant positive for PSU banks, providing them with a larger pool of global capital to fund growth, enhance technology infrastructure, and meet regulatory capital requirements. It is also seen as a move that could improve corporate governance and global standing.
Disclaimer: Not a SEBI Registered Analyst
I am not a SEBI Registered Investment Adviser or Research Analyst. All information shared is for educational and informational purposes only and is not intended as a substitute for professional financial advice. All opinions expressed herein are based on my personal observations and research. They do not constitute a recommendation or a solicitation to buy, sell, or hold any security. Investments in the securities market are subject to market risks. The value of investments may go up or down. Past erformance is not indicative of future results.
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