PNB, Bank of India, Indian Bank, and other PSU banks all saw a 6% decline.

State-owned banks saw selling pressure as all 12 constituents decreased after the government ruled out extending the foreign direct investment limit in public sector banks. The sector's general weakness was reflected in the 3% decline in the Nifty PSU Bank index. State-owned banks came under fresh selling pressure in Wednesday’s session, with all 12 constituents sliding strongly as mood fell after the government reaffirmed that it is not considering a proposal to expand the foreign direct investment (FDI) restriction in public sector banks. Indian Bank led the decline, tumbling 6% to ₹807 apiece, while Punjab National Bank, Bank of India, Canara Bank, Bank of Baroda, Central Bank of India, Union Bank, Punjab & Sind Bank, and UCO Bank were also trading lower, down up to 2%.

Reflecting the general weakness, the Nifty PSU Bank index slid 3% to an intraday low of 8,264, slipping nearly 5% from its previous high of 8,665. Earlier in October, reports had emerged suggesting that the government would propose expanding the FDI ceiling in public sector banks to 49% from the existing 20%. PSU bank stocks saw a significant surge as a result of the speculation, and the Nifty PSU Bank index reached new all-time highs. The government has recently made it clear that no such plan is being considered.

Minister of State for Finance Pankaj Chaudhary remarked on Tuesday that the government is not reviewing any plan to enhance the FDI ceiling. Responding to a written question in the Rajya Sabha on whether the government has suggested extending the FDI quota in PSBs to 49%, Chaudhary replied in the negative. Replying to another query, Chaudhary said the quantity of shares owned by the Union Government in the 12 public sector banks has not declined since 2020.

However, he stated that although the number of shares held by the government has remained unchanged, its percentage shareholding has dropped in several institutions due to capital raised through fresh share issuances by the banks. The FDI limit in PSBs and private-sector banks remains at 20% and 74%, respectively. In private-sector banks, up to 49% FDI is permissible under the automatic method, whereas investments beyond 49% and up to 74% require government approval.

Chaudhary went on to say that banks raise additional funds in order to satisfy the demands of corporate expansion and uphold legal obligations. Such fundraising lessens the fiscal burden on the government and boosts banks’ balance sheets.