The Indian government is reportedly considering raising the foreign investment limit in public sector banks (PSBs) from 20 percent to 49 percent. If this proposal is approved, it could attract around $4 billion in foreign inflows through MSCI indices, boosting investor interest in these banks.
Currently, the private sector banks in India allow up to 74 percent foreign ownership, while PSBs are capped at 20 percent. Increasing the cap would help reduce this gap and make public banks more attractive to global investors. The move could also bring more liquidity and stability to PSU bank stocks.
According to Nuvama Alternative & Quantitative Research, the current foreign holdings in PSU banks range between 4.5 percent and 12 percent, well below the current ceiling. This means there is already scope for additional foreign participation even before the proposed hike. If the cap is indeed raised to 49 percent, it could lead to a wave of new passive inflows, which MSCI would likely implement gradually across multiple review cycles.
However, analysts have also cautioned that this development is still at the speculation stage, with no official confirmation from the government yet. If the proposal does materialize, it may take a few quarters to clear regulatory processes. However, anticipation of such a move could drive PSU bank stocks up by 20–30 percent, as investors price in the potential for large inflows and stronger global participation.
Here are a few Public Bank stocks to see massive inflows if the government hikes the foreign ownership cap to 49%
State Bank of India
With a market capitalization of Rs. 8,54,801.34 crore, the shares of State Bank of India were currently trading at Rs. 926.05 per equity share, rising nearly 0.30 percent from its previous day’s close price of Rs. 923.25.
Foreign Institutional Investors (FIIs) held a stake in the State Bank of India of 9.57 percent in September 2025. According to Nuvama’s estimates, State Bank of India could attract $2.203 billion in inflows through the MSCI indices.
Coming into financial highlights, State Bank of India’s net interest income has increased from Rs. 46,541 crore in Q1 FY25 to Rs. 47,462 crore in Q1 FY26, which has grown by 1.98 percent. The net profit has also grown by 9.89 percent from Rs. 19,680 crore in Q1 FY25 to Rs. 21,626 crore in Q1 FY26.
Bank of Baroda
With a market capitalization of Rs. 1,42,367.60 crore, the shares of Bank of Baroda were currently trading at Rs. 275.30 per equity share, rising nearly 0.47 percent from its previous day’s close price of Rs. 274.
Foreign Institutional Investors (FIIs) held a stake in the Bank of Baroda of 8.71 percent in September 2025. According to Nuvama’s estimates, Bank of Baroda could attract $362 million in inflows through the MSCI indices.
Coming into financial highlights, Bank of Baroda’s net interest income has decreased from Rs. 12,560 crore in Q1 FY25 to Rs. 12,559 crore in Q1 FY26. The net profit has also decreased by 26.82 percent from Rs. 4,580.49 crore in Q1 FY25 to Rs. 3,351.88 crore in Q1 FY26.
Punjab National Bank
With a market capitalization of Rs. 1,38,604.90 crore, the shares of Punjab National Bank were currently trading at Rs. 120.90 per equity share, rising nearly 0.92 percent from its previous day’s close price of Rs. 119.80.
Foreign Institutional Investors (FIIs) held a stake in the Punjab National Bank of 5.67 percent in September 2025. According to Nuvama’s estimates, Punjab National Bank could attract $355 million in inflows through the MSCI indices.
Coming into financial highlights, Punjab National Bank’s net interest income has decreased from Rs. 10,657 crore in Q2 FY25 to Rs. 10,654 crore in Q2 FY26. The net profit has increased by 9.40 percent from Rs. 4,431.99 crore in Q2 FY25 to Rs. 4,848.64 crore in Q2 FY26.
Canara Bank
With a market capitalization of Rs. 1,17,782.41 crore, the shares of Canara Bank were currently trading at Rs. 129.85 per equity share, rising nearly 0.50 percent from its previous day’s close price of Rs. 129.20.
Foreign Institutional Investors (FIIs) held a stake in the Canara Bank of 11.89 percent in September 2025. According to Nuvama’s estimates, Canara Bank could attract $305 million in inflows through the MSCI indices.
Coming into financial highlights, Canara Bank’s net interest income has decreased from Rs. 9,638.84 crore in Q1 FY25 to Rs. 9,530.82 crore in Q1 FY26, which is a drop of 1.12 percent. The net profit has also decreased by 24.49 percent from Rs. 3,977.22 crore in Q1 FY25 to Rs. 3,003.18 crore in Q1 FY26.
Union Bank of India
With a market capitalization of Rs. 1,11,565.15 crore, the shares of Union Bank of India were currently trading at Rs. 146.15 per equity share, rising nearly 1 percent from its previous day’s close price of Rs. 144.70.
Foreign Institutional Investors (FIIs) held a stake in the Union Bank of India of 7.86 percent in September 2025. According to Nuvama’s estimates, Union Bank of India could attract $294 million in inflows through the MSCI indices.
Coming into financial highlights, Union Bank of India’s net interest income has decreased from Rs. 9,522.95 crore in Q1 FY25 to Rs. 9,243.84 crore in Q1 FY26, which is a drop of 2.93 percent. The net profit has increased by 14.87 percent from Rs. 3,600.95 crore in Q1 FY25 to Rs. 4,136.57 crore in Q1 FY26.
Indian Bank
With a market capitalization of Rs. 1,13,791.52 crore, the shares of Indian Bank were currently trading at Rs. 844.80 per equity share, rising nearly 1.86 percent from its previous day’s close price of Rs. 829.35.
Foreign Institutional Investors (FIIs) held a stake in the Indian Bank of 4.68 percent in September 2025. According to Nuvama’s estimates, Indian Bank could attract $459 million in inflows through the MSCI indices.
Coming into financial highlights, Indian Bank’s net interest income has increased from Rs. 6,215.51 crore in Q2 FY25 to Rs. 6,588.57 crore in Q2 FY26, which is a growth of 6 percent. The net profit has increased by 10.97 percent from Rs. 2,740.03 crore in Q2 FY25 to Rs. 3,040.53 crore in Q2 FY26.
Written By – Nikhil Naik
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