Indian Bank, PNB, Canara Bank Fall Up to 12% From Highs as PSU Bank Sell-Off Deepens

Public sector banks such as Indian Bank, Punjab National Bank (PNB) and Canara Bank saw small gains of up to 1% on December 9. This comes a day after a major sell-off dragged the Nifty PSU Bank index down 3.40%, its second-biggest fall in December, wiping out 8% in just 9 sessions.

Despite a mild recovery, many PSU banks remain significantly below their recent highs.

PSU Banks Down 5–12% From Peaks

The correction has hit most public-sector banks:

• Indian Bank is down 13% from its 52-week high of ₹894.85 (Nov 18).
• PNB has slipped 8.65% from its recent high of ₹127.80.
• Bank of Maharashtra, Bank of India, Bank of Baroda, Canara Bank and Union Bank of India have fallen 5–8% from their highs.
• State Bank of India (SBI) is down 4% from its recent peak of ₹999.

Why PSU Bank Stocks Crashed

PSU banks had been rallying for 3 months on speculation that the government might raise the FDI limit in public sector banks from 20% to 49%.

However, the government clarified that no such proposal is being considered. 
Minister of State for Finance Pankaj Chaudhary confirmed in the Rajya Sabha that the FDI limit will remain unchanged.

This clarification halted the rally and triggered profit-booking across PSU banks.

Current FDI Rules

• PSU banks: Up to 20%
• Private banks: Up to 49% via automatic route; 49–74% with government approval

Read More: Eternal CEO Deepinder Goyal Reveals ‘Temple’, a New Brain Blood Flow Monitoring Device.

Strong YTD Returns Offer Some Support

Even with the recent drop, PSU banks continue to show strong performance for the year:

• Indian Bank is up 49% YTD, with a massive 940% gain over five years.
• Canara Bank has surged 45% and may see its best yearly performance since 2022.
• Bank of India: Up 37% this year
• SBI: Up 21% YTD
• Union Bank, PNB and Bank of Baroda have delivered returns of 15–24%

These robust gains have helped investor sentiment remain somewhat stable despite the recent correction.

Conclusion

PSU banks saw a notable pullback after the government clarified that the FDI limit in public sector banks will not be increased. While short-term pressure may continue, many PSU banks still show strong yearly and multi-year returns, which could support long-term investor confidence.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.