Why Canara Bank Share Price is Falling

Banking stocks came under strong selling pressure in trade on 3 December, dragging the entire PSU basket lower.

The Nifty PSU Bank index had slipped more than 3% to 8,253, marking its second straight session of decline.

The weakness was widespread, with every major PSU lender, from heavyweights like State Bank of India to mid-sized names like Central Bank of India, seeing notable cuts on the exchanges.

Amid this broad correction, Canara Bank particularly stood out, with its shares dropping over 4% in early trade.

Here's what's weighing on the stock today.

# Finance Ministry's Clarification on FDI Limit

The sharp fall in Canara Bank's share price can be traced to the Finance Ministry's clarification on the foreign direct investment (FDI) limit in public sector banks.

The statement removed hopes of any near-term increase in FDI limits, a development that investors had been pricing in over the past few months.

The Ministry, in a written reply to the Lok Sabha, confirmed that there is no proposal to raise the FDI limit in PSU banks to 49%.

It reiterated that the current limit remains 20% for public sector banks and 74% for private sector banks, with higher stakes in the private sector requiring government approval.

The clarification was issued in response to questions on whether FDI limits would be hiked, the potential inflows involved, and measures to prevent excessive foreign ownership.

This clarification dampened sentiment across the PSU banking space, as the market had rallied strongly on speculation that the government was exploring higher foreign investment limits. The PSU Bank index had gained 11.4% in September, 8.7% in October and 4% in November, partly due to these expectations.

With the Ministry ruling out any such move, stocks that had run up sharply, including Canara Bank, which currently has 10.55% foreign shareholding, faced immediate selling pressure.

Recent Development

Canara Bank recently strengthened its capital position by raising Rs 35 billion (bn) through a fresh issuance of Basel III-compliant Additional Tier I (AT1) bonds-an important instrument used by banks to enhance their core capital.

In a regulatory filing, the bank said it issued 7.55% unsecured, subordinated, listed, rated, non-convertible, perpetual AT1 bonds, each carrying a face value of Rs 10 million (m).

These bonds are perpetual in nature and form part of the bank's Tier I capital framework.

The fundraise included a base issue of Rs 10 bn and a green shoe option of Rs 25 bn, both of which were fully subscribed.

The issue opened and closed on 28 November 2025, resulting in the placement of 3,500 bonds with 37 allottees.

Allotment was completed on 2 December 2025.

The bonds carry an annual coupon of 7.55%, payable on December 2 each year, and are proposed to be listed on the National Stock Exchange.

What Next for Canara Bank?

According to Managing Director & CEO K. Satyanarayana Raju, Canara Bank expects credit growth to stay strong at around 13% in FY26, continuing its trend of comfortably surpassing internal guidance for the last three years.

The bank plans to maintain this momentum across retail, corporate, and MSME lending.

Further, the bank is keeping a conservative NIM outlook of 2.75%, supported by stable asset quality and only a minor year-on-year compression.

He noted that margins could improve if policy rates remain unchanged, while any further rate cuts may temporarily impact NIMs.

On the asset quality front, Raju highlighted that the bank's Provision Coverage Ratio (PCR) stands at a strong 93.6%, with plans to increase it to 96-97%.

Additional buffers are also being created under the expected credit loss (ECL) framework to further strengthen the balance sheet.

How shares of Canara Bank have performed recently

The shares of the bank fell 4% in the trade today.

However, over past 6 months, the shares of Canara Bank have rallied over 26%. While on YTD basis the is up over 45%.

The company touched its 52-week high of Rs 154.2 on 2 December 2025 and its 52-week low of Rs 78.58 on 3 March 2025.

About Canara Bank

Canara Bank has grown from a small regional bank into a national-level financial institution with a wide presence in India and abroad.

The bank offers a range of retail banking services including, savings and current accounts, fixed deposits, recurring deposits, loans (home, personal, education, car, gold, business), as well as debit and credit cards.

It's also a SEBI-registered Category I Merchant Banker, providing capital market-related services such as issue management (public, rights, private placement), underwriting, consultancy, and corporate advisory services.

It also acts as a banker to issues and offers ASBA (Applications Supported by Blocked Amount) facility, allowing customers to apply for shares in primary markets while their funds remain in their accounts until allotment.

Canara Bank's extensive network, strong financial performance, and digital transformation position, holds promise for the future.

To know more, check Canara Bank's fact sheet and latest quarterly results.

For a sector overview, read our banking sector report.

You can also compare Canara Bank with its peers on our website.

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Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

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