What is the proposed change for FDI in Indian public sector banks?

The Finance Ministry is considering raising the Foreign Direct Investment (FDI) cap in public sector banks to 49 percent from the current 20 percent.

Why is India considering increasing the FDI limit in its public banks?

This move aims to bring public sector banks in line with private banks and is seen as crucial for enhancing their capital adequacy and the country's credit-to-GDP ratio.

What are the other initiatives planned for Indian banks?

Public sector banks will launch qualified institutional placements (QIPs) worth about ₹500 billion, and the government is proceeding with the strategic sale of IDBI Bank.

Home / Business and Economy / India Eyes 49% FDI in Public Banks

India Eyes 49% FDI in Public Banks

2 Feb

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Summary

FDI in public banks may increase to 49% from 20%.
Economy needs to increase credit-to-GDP ratio significantly.
Government plans strategic sale of IDBI Bank soon.

The Finance Ministry is actively evaluating a proposal to increase the Foreign Direct Investment (FDI) limit in public sector banks (PSBs) to 49%, up from the existing 20%. This potential change would align PSBs with the FDI regulations currently applicable to private banks in India. Such a move is seen as crucial for enhancing the capital adequacy of these institutions.

Discussions are ongoing for this inter-ministerial consultation. The financial services secretary highlighted the urgent need to increase India's credit-to-GDP ratio from 56% to 150%, emphasizing the importance of capital deployment and adequacy. India also aims to develop 3-4 large banks to compete globally, as currently only SBI and HDFC Bank are among the world's top 100 lenders.

Further initiatives include PSBs launching qualified institutional placements (QIPs) worth approximately ₹500 billion. Additionally, the government is moving forward with the strategic sale of IDBI Bank, with financial bids expected soon. The government and LIC, holding significant stakes, plan to divest a combined 60.7% of their shares.