PNB and other PSU banks tumble up to 6% after Finance Minister clarifies no FDI‑hike plans

Synopsis: PSU bank stocks, led by Indian Bank and PNB, fell up to 6% after the Finance Ministry clarified no FDI hike to 49% is planned, disappointing markets that had speculated on easier capital-raising reforms.

Public sector bank (PSU) stocks tumbled on December 3, 2025, after the Finance Ministry clarified that there are no plans to raise the FDI limit in PSU banks from the current 20% to 49%, contrary to market speculation. 

Following the clarification, shares of PSU banks fell sharply, led by Indian Bank and Punjab National Bank. Indian Bank dropped 6% while PNB declined by 5%. The Nifty PSU Bank index fell 3%, reflecting the market’s disappointment over the stalled FDI reforms.

Nifty PSU Bank opened at 8,539.05 and is currently trading at 8,307, down 3%, hitting a low of 8,243.15 from its previous close of 8,514.90.

What’s the news

PSU bank stocks declined up to 6% on December 3, 2025, led by Indian Bank and Punjab National Bank (PNB), after Minister of State for Finance Pankaj Chaudhary clarified in a Rajya Sabha written reply that no proposal exists to raise the FDI limit in public sector banks from the current 20% (automatic route) to 49%. 

This statement on December 2 dispelled market speculation fueled by an October Reuters report and subsequent rumours suggesting government consideration of FDI relaxation to bolster capital for growth and compliance. The Nifty PSU Bank index fell around 3%, with broader benchmarks like Sensex and Nifty remaining flat amid mixed sector trends.​​

The rally in PSU bank shares earlier stemmed from optimism over potential FDI hikes, which would align them closer to private banks’ 74% cap (49% automatic), enabling easier fundraising without diluting government stakes significantly. 

However, the Finance Ministry emphasised that RBI approval is needed for stakes over 5%, and government holdings have remained stable despite equity issuances. Stocks like Bank of India, Canara Bank, and Bank of Baroda also dropped 1-3%, reflecting dashed expectations for privatisation-like reforms in the sector.

Written by Manideep Appana

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