Not many banking stocks attracted fresh foreign institutional investor (FII) buying in the June 2026 quarter. Our scan of listed banks found only a handful where FIIs increased their holdings during the period.
That said, rising FII ownership should be viewed as a starting point—not a reason to buy a stock on its own. Institutional buying can signal confidence, but investors should always assess a bank's fundamentals, asset quality, earnings trajectory and valuations before making an investment decision.
Here are three banking stocks where FIIs raised their stake in the April-June 2026 quarter.
Jammu & Kashmir Bank
Jammu & Kashmir Bank, headquartered in Srinagar, has a strong presence across Jammu & Kashmir and an expanding footprint across India. The governments of Jammu & Kashmir and Ladakh are the bank's promoters, collectively holding a 59.4% stake. The bank serves retail, corporate and government customers through a broad range of banking and financial services.
FIIs increased their holding in the bank from 8.4% in the March 2026 quarter to 9.4% in April-June.
The lender has staged a remarkable turnaround over the past few years, driven by a series of operational and strategic initiatives. It reorganized its clusters and zones, created dedicated verticals for deposits, liabilities, alternate channels and cross-selling, and entered into co-lending arrangements.
The bank has also been re-included in the Food Credit Consortium after an eight-year gap and has received authorization under the Capital Gains Account Scheme.
The financial improvement has been equally notable. After reporting losses in FY20, the bank has delivered higher net profits every year since. Reflecting this turnaround, the stock has climbed from around ₹12-13 in March 2020 to about ₹184, supported by sustained earnings growth.
This consistent improvement appears to have attracted greater FII interest.
South Indian Bank
Established in 1929 in Thrissur, Kerala, South Indian Bank has evolved from a regional lender into a technology-driven, pan-India bank while retaining a strong presence in southern India.
FIIs increased their stake by 1.2 percentage points, taking their holding to 25.4% in June 2026.
The bank reported a record net profit of ₹14.55 billion for FY26, up 12% from ₹13.03 billion a year earlier. Total deposits rose 15% to ₹1,233.46 billion.
Asset quality also improved significantly. Gross NPAs declined from 3.2% to 1.43%, while net NPAs fell from 0.92% to 0.29%. The annual slippage ratio stood at 72 basis points.
The bank has strengthened its operating performance through improvements in processes and systems, while continued investment in digital channels has enhanced efficiency.
DCB Bank
DCB Bank is a private sector lender offering retail, MSME, agriculture, corporate and digital banking services.
Originally established as a cooperative institution in 1930 and converted into a scheduled commercial bank in 1995, it has built a nationwide branch network.
FIIs increased their holding in the bank from 12.7% in March 2026 to 13.5% in June 2026.
Operational performance remained strong during Q4 FY26. Advances grew 18% year-on-year and 6% sequentially, while deposits rose 21% year-on-year and 7% quarter-on-quarter. Management said it intends to maintain deposit growth ahead of loan growth.
The bank reported its highest-ever quarterly profit after tax of ₹2.06 billion, while full-year profit reached a record ₹7.32 billion. This marked the third consecutive quarter of record quarterly earnings.
Management has reiterated its strategy of rebalancing its mortgage portfolio between home and business loans, increasing the average ticket size and expanding direct sourcing relative to DSA-led sourcing.
It also highlighted the improvement in asset quality, with the slippage ratio declining to 2.28% from 3.09%, which it believes supports the quality of the loan book going forward.
Conclusion
An increase in FII ownership can be a useful indicator of institutional confidence in a bank's earnings outlook, asset quality and governance.
However, it should not be viewed in isolation. FII flows are influenced by global factors such as US interest rates, currency movements and broader risk sentiment, making them inherently volatile. Moreover, shareholding data is disclosed with a lag, meaning the market may have already priced in much of the buying.
Treat rising FII ownership as a screening tool rather than an investment thesis. Before investing, evaluate key banking metrics such as net interest margin (NIM), asset quality, credit growth, capital adequacy and valuation, alongside corporate governance and long-term earnings prospects.
Happy investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com