PSU Bank Stocks Drop Up to 6% as Finance Ministry Denies FDI Hike Plans

Shares of public sector undertaking (PSU) banks tumbled sharply on December 3, 2025, after the Finance Ministry explicitly denied any proposal to increase the foreign direct investment (FDI) limit in state-run banks from the existing 20% to 49%. The clarification dashed market hopes that had been fueled by an October Reuters report suggesting the government was actively considering doubling the FDI cap to attract more overseas capital into PSU lenders. Key decliners included

k and Bank (PNB), both falling as much as 6%, while the broader Nifty PSU Bank index slid over 3% to 8,257.40 by 11:30 a.m. In a written reply in the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary stated there was no such proposal under consideration, marking the second straight day of losses for the sector. On December 2, PSU bank stocks had weakened after the minister also ruled out any near-term merger or consolidation of public sector banks. The sharp reversal highlights the market’s sensitivity to policy speculation around India’s state-owned banking space, with investors quickly unwinding positions built on expectations of liberalization and reform.