FDI Limit In PSU Banks May Rise To 49%, Government Prepares Draft Cabinet Note As RBI Backs Proposal

New Delhi: The Indian government is contemplating raising the foreign direct investment (FDI) ceiling in public sector banks from the current 20 percent to 49 percent, a proposal backed by the Reserve Bank of India (RBI) and currently under review. The Finance Ministry has circulated a draft Cabinet note to seek feedback from other ministries before finalizing the decision.

Currently, private sector banks can accept up to 74 percent foreign investment, whereas public sector banks are limited to 20 percent. If the proposed change is implemented, it could open avenues for larger foreign investments in the banking sector, contingent upon regulatory clearances and existing ownership regulations. India's foreign investment inflows saw a 6 percent rise to USD 19.81 billion between April and June of the current fiscal year, compared to USD 18.62 billion in the same period last year.

The services sector led investments with USD 7.04 billion, followed by computer hardware and software at USD 2.84 billion and trading at USD 1.92 billion. The government is also proposing a significant hike, seeking public comments, to lift the FDI limit in the insurance sector to 100 percent, as part of the "Insurance for All" initiative aimed at achieving universal coverage by 2047.

Non-conventional energy attracted USD 1.24 billion, while automobiles received USD 622 million in FDI during this period. Among Indian states, Tamil Nadu led in FDI investment with USD 5.95 billion, followed by Maharashtra with USD 4.22 billion and Delhi at USD 2.67 billion.