PSU Bank Stocks Keep Climbing as Government Pushes Subsidiary Monetisation

Public sector bank stocks are on a roll. For the fifth day straight, they're heading up, thanks to a fresh push from the Finance Ministry urging banks to unlock value by monetising their subsidiaries. That news lit a fire under the entire Nifty PSU Bank index, with all 12 members in the green.

Here’s how the numbers look: By mid-morning, the Nifty PSU Bank index had jumped around 1.37%, reaching 7,111.85. That’s a strong open, driven by investor confidence. Meanwhile, broader indices like the Nifty 50 and Bank Nifty stayed mostly flat, making PSU banks the day’s clear winners.

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Top Performers

Leading the pack? Punjab National Bank, up more than 3%. Close behind were Bank of Baroda, gaining nearly 1.93%, and Canara Bank, up around 2% as of 12:30 PM IST.

The bigger names weren’t left out either, SBI, Indian Bank, and Union Bank all notched intraday gains of up to 4%. SBI, being the index heavyweight, added serious momentum to the rally.

What’s Driving the Surge?

On June 30, the Finance Ministry made it clear: state-run banks need to start unlocking value by monetising their subsidiaries and joint ventures. Think IPOs or strategic stake sales. About 15 such entities are under active review, including SBI General Insurance and SBI Payment Services, both seen as strong IPO candidates down the line.

The goal is simple: free up capital stuck in non-core businesses and redirect it into areas that drive growth, like lending. It’s also a move to boost governance and transparency by aligning with global best practices through public market involvement.

And let’s not forget the fiscal angle. The government stands to gain from the monetisation proceeds, helping with its FY26 fiscal goals and disinvestment targets.

Strong Numbers Back the Story

Here’s why investors are feeling good: 

• PSU banks are showing solid fundamentals.
• The net NPA ratio is down to just 0.52% as of March 2025.
• Collectively, these 12 banks pulled in a record ₹1.78 lakh crore profit in FY25, up 26% from the previous year.
• Brokerages are bullish and some recommend accumulating stocks like Bank of Baroda, Indian Bank, and Bank of Maharashtra.

Zooming Out: How Are Markets Doing?

Even though broader markets are a bit sluggish, PSU banks are shining bright. By mid-morning, the PSU Bank index had gained about 2.4%, topping the sectoral charts on the NSE. The Nifty 50, by contrast, dipped 0.3%, while Bank Nifty barely moved.

The RBI’s recent 50 basis point rate cut is expected to support lending, but it’s the monetisation theme that’s really stealing the spotlight right now.

Looking Ahead

Next up? A pipeline of IPOs from key bank subsidiaries, especially SBI’s, is expected to roll out over the medium to long term. The Finance Ministry and RBI are also counting on continued credit growth, particularly in productive sectors, to maintain profit momentum into FY26.

Analysts think the index could test the 7,200–7,300 range soon, if things go smoothly. But any delay in IPOs or global market corrections could cause a dip, which some investors might see as a buying opportunity around the 6,950 level.

Monday’s rally was more than just market noise, it signalled a turning point. With cleaner balance sheets, strong profits, and clear policy support, PSU banks are starting to rewrite their story. The next chapter? Watch for how well the monetisation push is executed, and whether it turns short-term excitement into long-term value.