India is set to allow foreign investors to hold up to 49% equity in state-run banks, more than double the current cap of 20%, according to a person directly involved in policy discussions. The move aims to attract global capital, boost competitiveness, and strengthen the financial sector.

Currently, foreign participation in India’s public banks is limited, with the government retaining majority control. Under the proposed change, investors could acquire nearly half of a bank’s shares, enhancing capital bases and operational capabilities. Analysts say the increased foreign involvement could also introduce international best practices, strengthen corporate governance, and improve service delivery.

While the government maintains oversight to ensure alignment with domestic financial policy, the policy shift is expected to make India’s state-run banks more attractive to international investors. Long-term benefits could include expanded branch networks, technological upgrades, and deeper market penetration.

Experts also highlight that India’s large population, growing economy, and digital infrastructure make this a strategic opportunity for foreign investors seeking high-growth emerging markets. The initiative is part of broader reforms to modernize public sector banks and integrate them more closely into global financial networks.