Government Banks May Open Doors to Foreign Investors: Eyes on ₹171 Lakh Crore in Assets

The Indian government is reportedly considering raising the FDI (Foreign Direct Investment) limit in public sector banks. Currently, there are 12 public sector banks in India with combined assets of around ₹171 lakh crore, accounting for approximately 55% of the country’s banking sector. The government aims to retain a 51% stake in these banks, though its current ownership is significantly higher.

FDI Proposal in Public Banks
According to a Reuters report, the government is discussing the possibility of allowing up to 49% foreign direct investment in state-owned banks. Presently, the FDI cap in these banks is 20%. Financial Services Secretary M. Nagaraju stated that ministries are consulting with each other on this proposal. Reports indicate that the Finance Ministry has also been in discussions with the RBI for several months, though the proposal has not yet been finalized.

Banking Sector Review
Finance Minister Nirmala Sitharaman, while presenting the Budget 2026-27, announced the formation of a high-level committee to conduct a comprehensive review of the Indian banking sector. The aim is to prepare public sector banks to support India’s growth ambitions while ensuring operational efficiency. She emphasized that Indian banks are in a strong position, with improving profitability and growing global reach, but further reforms are needed to sustain and enhance growth.

Global Comparisons
In terms of assets, two Indian banks make it to the world’s top 10—State Bank of India (SBI) with total assets of $0.9 trillion, and HDFC Bank with $0.5 trillion in assets. The list is dominated by Chinese banks, with the Industrial and Commercial Bank of China (ICBC) leading at $6.7 trillion, followed by the Agricultural Bank of China ($5.9 trillion), China Construction Bank ($5.6 trillion), and Bank of China ($4.8 trillion) occupying the top four positions.

If implemented, the increase in FDI limits could attract foreign investors’ attention to India’s public banks, potentially bringing in capital and expertise while retaining government control.