A report by Nuvama Institutional Equities indicates that India’s public sector banks such as State Bank of India (SBI), Punjab National Bank (PNB), and Canara Bank could draw up to approximately US$3.98 billion (roughly ₹33,200 crore) in passive foreign institutional investment (FII) flows if the government raises the FII ceiling to 49 %. Currently, the cap stands at just 20 %.
Under a more modest increase to 26 %, the brokerage estimates potential inflows around US$1.19 billion (≈ ₹9,950 crore). Among individual banks, SBI alone could receive around US$2.2 billion (≈ ₹18,400 crore) if the 49 % limit materialises; PNB, Canara Bank and other state-run lenders could each attract inflows in the range of US$294–US$362 million. The current FII holding across these banks is between 4.5–12 %.
Nuvama highlights that much of this potential capital stems from index-linked passive flows, particularly via global funds such as those tracking MSCI Inc. benchmarks. An increased ‘foreign inclusion factor’ would expand free-float and could lead to a broad re-rating of the PSU banking segment, with a projected initial rally of 20–30 % even before the full implementation of the policy change. The brokerage notes, however, that the timeline remains uncertain and the actual flows are likely to be phased in over multiple quarters.
The prospective policy shift comes at a time when state-run banks dominate roughly 55 % of India’s banking assets, yet face structural challenges relative to private peers. Greater foreign participation is expected to enhance capital availability and governance frameworks in the sector.
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