According to Knight Frank, India will require investment of $2.2 Trillion to reach a GDP of $7 Trillion by 2030. Public Sector Banks are likely to contribute significantly to this investment opportunity.

PSU banks provide an attractive investment opportunity to ride the infrastructure investment growth arrow.

Currently, Nifty PSU Bank PE is at 6.6 and PBV is at 1.2 and dividend yield of 2.4%. Expected growth is in double digits and could be closer to 15% over the next 3-5 years riding on the capex push by the Government of India. Public Sector Banks hold the dominant market share of more than 50% in credit markets. In Q3 FY25, public sector banks outpaced the private sector banks in terms of loan growth with a 12.4% growth rate vs. 10.5% for the private banks.

The PSU banks have also delivered a net profit growth of 31.3% y-o-y for the first nine months of FY2025. The prime focus of PSU banks is on infrastructure, MSMEs and agriculture.

PSU banks have invested heavily in technology and Digital Banking. In fact, one of the most popular apps is from a PSU bank with more than 75 million registered users and has generated loans worth INR 1 trillion.