Nifty PSU Bank Index Gains 1.5% After Govt Raises FII Cap; Union Bank Gains Nearly 5%

Public sector bank stocks witnessed a strong rally on Friday after the government approved an increase in the foreign institutional investment (FII) cap for state-run lenders. The move boosted investor sentiment, with the Nifty PSU Bank index climbing 1.5% in trade.

Among the top performers, Union Bank of India led the surge, jumping 4.6% to ₹148.85, while Canara Bank rose 2.4% to ₹136.10. Other state-run lenders, including Punjab National Bank, Indian Bank, Bank of India, and Bank of Maharashtra, also contributed to the index’s gains.

Key Drivers Behind the Rally in Nifty PSU Bank Index

The market reacted positively to the government’s decision to raise the FII cap from 20% to 49% for PSU banks. As per news reports, this policy change could unlock nearly US$4 billion in passive inflows into the sector, enhancing liquidity and strengthening investor participation.

The largest state-owned lender, State Bank of India (SBI), is expected to benefit the most, potentially attracting inflows worth over US$2.2 billion.

Rising Global Interest in Indian Banks

Apart from the policy boost, increasing global interest in Indian financial institutions is also supporting PSU bank stocks. Recent international investments, such as Emirates NBD’s $3 billion stake purchase in RBL Bank and Sumitomo Mitsui Banking Corp’s investment in Yes Bank, reflect growing confidence in India’s banking sector.

This renewed foreign participation signals optimism in India’s economic growth and the long-term profitability of its banking industry.

Union Bank of India Share Price in Focus

Union Bank emerged as the top gainer following its strong Q2FY26 results. The bank reported a net profit of ₹4,249 crore, while its gross NPA ratio improved to 3.29% from 4.36% a year earlier. Its capital adequacy ratio of 17.07% highlights a healthy financial position, contributing to rising investor confidence.

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Conclusion

The government’s move to lift the FII cap has reignited investor interest in PSU banks, pushing the Nifty PSU Bank index higher. With improving fundamentals and growing global participation, the sector appears poised for further growth. However, sustained momentum will depend on continued policy support and stability in the broader financial environment.

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