PSU Bank Stocks Slide Nearly 2% After Govt Rejects FDI Hike Reports

The Nifty PSU Bank index witnessed sharp selling pressure on December 3 after the government clarified that it has no plans to raise the foreign direct investment (FDI) limit in public sector banks. The clarification triggered immediate profit-booking across the PSU banking space, which had seen a strong rally earlier following speculative reports about an FDI hike.

At 10:10 am on Wednesday, the Nifty PSU Bank index was down nearly 2% at 8,373.50, reflecting broad weakness across state-owned lenders.

Government Clarifies: ‘No Proposal to Raise FDI Limit’

The sell-off was triggered by comments from Minister of State for Finance Pankaj Chaudhary, who denied reports claiming the government is considering increasing the FDI limit in PSU banks from 20% to 49%.

Chaudhary responded to a written question in the Rajya Sabha, stating clearly that no such proposal is under consideration.

This clarification came after PSU bank stocks had recorded sharp gains earlier, driven by expectations of a possible FDI hike.

Earlier in October, a Reuters report had said the government was planning to allow up to 49% direct foreign investment in state-run banks — more than double the current limit — leading to significant upside in PSU banking stocks.
However, the latest government statement has reversed that sentiment entirely.

Nifty PSU Bank Index Extends Its Decline

Today’s fall marks the second consecutive session of decline for the Nifty PSU Bank index.

On the previous day, PSU bank shares also slipped after Minister Pankaj Chaudhary clarified in a written reply in the Lok Sabha that the government does not have any proposal for merger or consolidation of state-owned banks, denying another round of speculative reports.

Two back-to-back clarifications from the government on key policy matters have dampened investor sentiment in PSU banking stocks.

With FDI expectations cooling off and merger reports dismissed, the PSU Bank index continues to face selling pressure from traders and short-term investors.

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Top Losers in the PSU Bank Pack

The decline on December 3 was broad-based, with most PSU bank stocks trading in the red.
The sharpest correction was seen in Indian Bank, followed by PNB, Bank of India, and several others.

Major Losers on Nifty PSU Bank Index:

• Indian Bank

  • Top loser of the day

  • Fell around 4%

  • Trading at ₹826.20 per share

• Punjab National Bank (PNB)

  • Dropped nearly 3%

• Bank of India

  • Declined more than 2%

• Canara Bank

• Punjab & Sindh Bank (PSB)

• Central Bank of India

• Bank of Maharashtra

• Bank of Baroda

• UCO Bank

  • All fell around 2% each

• Indian Overseas Bank (IOB)

• State Bank of India (SBI)

  • Both are down around 1% each

The correction was widespread, indicating uniform negative sentiment across the PSU banking space.

Why the Market Reacted Strongly?

While the article data does not include analyst commentary, the market reaction clearly shows that traders were heavily positioned based on earlier expectations of increased FDI.

The government’s denial removed the immediate policy trigger, leading to profit-booking across the sector.

Additionally, the back-to-back denials — first on PSU bank mergers, then on the FDI limit — added to the negative sentiment.

What does this mean for PSU Bank Investors?

(Analysis restricted only to facts from your source — no external predictions.)

Based purely on the provided information:

• The sector has witnessed two days of continuous decline.

• No FDI hike and no merger plans are currently being considered by the government.

• Stocks that rallied earlier on expectations have corrected sharply.

The Nifty PSU Bank index slipping nearly 2% shows that investor sentiment turned cautious immediately after the government clarification.

Conclusion

The sudden reversal in PSU bank stocks highlights how sensitive the market is to policy-related news flow. The government’s clear denial of any proposal to raise FDI limits in public sector banks led to sharp, broad-based declines across the Nifty PSU Bank index. With almost all major lenders in the red and the index falling for the second straight session, the PSU banking space remains under pressure in the absence of any immediate positive triggers.

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