Nifty PSU Bank Index Soars 20% in 2 Months to Hit Record 8,118 on FDI Hike Buzz

Public sector banks continued their rally, pushing the Nifty PSU Bank index to a new all-time high of 8,118.95 in Tuesday’s trade, up nearly 2%. In the past 2 months, the index has surged by 20%, far outperforming the Nifty 50, which rose 6.2% during the same period.

Top gainers included SBI, UCO Bank, Punjab & Sind Bank, Central Bank of India, PNB, Indian Bank, Union Bank, Bank of Maharashtra, and Canara Bank, which gained between 1–2% in intra-day trading.

FDI Limit Hike Triggers Optimism

The surge came after reports that India may raise foreign direct investment (FDI) limits in PSU banks to 49%, up from the current 20% cap. The move aims to attract more foreign capital and align PSU bank rules with private sector norms, where FDI is allowed up to 74%.

Discussions are reportedly ongoing between the Finance Ministry and the RBI, though the final decision is pending. The government is expected to retain at least 51% ownership in PSU banks.

Sector Fundamentals Strengthen

Public sector banks have undergone a major turnaround. Their return on assets (RoA) reached 1.1% in FY25, supported by better credit practices, cost control, and strong recoveries.

Gross NPA ratios have dropped from 9.11% in March 2021 to 2.58% in March 2025, showing a significant improvement in asset quality.

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Conclusion

The Nifty PSU Bank index’s sharp rally reflects renewed investor confidence as reforms gain momentum. If the government proceeds with the FDI hike, PSU banks could see greater foreign inflows, stronger valuations, and a sustained re-rating in the coming quarters.

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