The index of Nifty PSU Bank has also shown a significant decline, falling by 8% in the past two trading days, when investors were involved in profit booking activities. In the intra-day trade on Monday at the National Stock Exchange (NSE), the index declined by 2.4%, which is a continuation of the low growth that had started after hitting record highs. Individual performers at the Indian Bank declined by 4% to ₹810.60 with an overall decrease of 11% during the two days following a record high of ₹923. Bank of Baroda (BOB) also experienced a decline of 3% in intra-day trade to ₹270.50, and as a result, this cumulative loss had reached 10% in the span of two days.
The largest public sector lender in the country, State Bank of India (SBI), was not spared in the sell-off. Its stocks declined 3% to ₹990.20 in the intra-day trades on the NSE. SBI market price is down by 8% within the last two trading sessions and is declining on a record high of ₹1,083.60 that was experienced on Sunday, February 1, 2026.
The Nifty PSU Bank index had other constituents, which included Punjab National Bank, Uco Bank, Punjab and Sind Bank, Indian Overseas Bank, and Union Bank of India, which also, each of which was down by about 2%. Even following this short-term correction, the Nifty PSU Bank index has been able to outperform the rest of the market by far, gaining 21% in the past five months as opposed to the 1% increment in the Nifty 50.
The market trend coincides with huge policy announcements on the future of the Indian banking sector. The Centre has announced intentions to set up a top-tier banking committee on Viksit Bharat. This committee has the responsibility of scrutinizing the structure of the sector in a manner that will prepare it to enter the second stage of Indian economic development.
One of the main areas that the panel will be concerned with is the development of fewer and bigger banks with robust balance sheets, and this may include the compaction of small public-sector banks. In addition, the committee should review the ownership structures in banks and the disproportion between ownership and voting rights in private banks, which, at the moment, limit voting to no more than 26%.
The government can also review the foreign ownership policies, such as the 20% foreign direct investment (FDI) limit on state-owned banks, as part of the structural review. According to analysts at ICICI Securities, shifting towards a standardized and transparent system rather than case-by-case approvals would enhance efficiency in the deployment of capital and risk management.
In FY27, the Centre has established a target of ₹80,000 crore of disinvestment and monetisation of assets. This is a steep 135% growth based on the adjusted FY26 forecast of ₹33,837 crore. With the government still seeking to complete all disinvestment decisions by the cabinet, which include the realisation of stake sales in IDBI Bank, LIC, and dilution of stake in other PSU banks to comply with minimum public shareholding requirements, Finance Minister Nirmala Sitharaman has hinted that the government will still pursue all disinvestment proposals approved by the cabinet.
According to the opinion of market professionals at JM Financial Institutional Securities, this forward-looking attitude of the government is a plan to achieve significantly greater financial demands of the economy by 2047. It is regarded as a critical step towards the Viksit Bharat theme since the assessment of whether the existing banking system will be able to serve the demand in the future is considered.
The increase in the securities transaction tax (STT) is deemed to have negative impacts on the short-term market sentiment, although it is likely to aid in the management of speculative behavior. The fact that GST does not apply to domestic brokers is a marginal positive. The aggressive miscellaneous receipts target of FY27 shows that the government is considering key initiatives within the space of the public sector banking to achieve its financial objectives.
The 8% decline in the Nifty PSU Bank index in recent times signifies a bout of consolidation and profit-taking after a couple of years of outperformance. India banks, including Indian Bank and Bank of Baroda, have fallen by double-digits; the long-term prospects of the industry are being pegged on the ambitious reform agenda of the government.
Under the plans with a high-level review committee, possible bank mergers, and an ambitious ₹80,000 crore disinvestment agenda, the landscape of the state-owned banking sector is ready to undergo major structural changes. Shareholders are now weighing these long-term growth opportunities and policy changes against short-term market instability and new tax structures.