PCA rejig hope: Nifty PSU Bank index up 8 %; OBC, Canara Bank rally 13%

Shares of public sector undertaking (PSU) banks were in focus on Monday, with Nifty PSU Bank index surging 8%, its sharpest single day rally in past one year, on the National Stock Exchange (NSE). 

The up move came after a media report suggest that the government expects some changes in the prompt corrective action (PCA) framework prescribed by the Reserve Bank of India (RBI) to enable more sanction of credit by PSU banks.

State Bank of India (SBI), Bank of India, Indian Bank, Canara Bank, Oriental Bank of Commerce, Bank of India, Union Bank of India, Punjab National Bank, Bank of Baroda and Syndicate Bank were up in the range of 6% to 14% on the NSE.

Nifty PSU Bank index, the largest gainer among sectoral indices, was up 8%, as compared to 2% gain each in Nifty 50, Nifty Bank and Nifty Private Bank index. The PSU Bank index recorded its sharpest rally since October 25, 2017, when it rallied 30% in single day.

According to a Business Standard report, the government had demanded the aligning of RBI’s PCA framework with the global practices, in terms of internationally accepted Basel norms for banks. The Centre feels this will unlock capital to the tune of Rs 600 billion and help banks to provide liquidity to NBFCs and MSMEs. However, the RBI showed reluctance to ease the PCA framework.

The government has agreed to advance the recapitalisation programme for PSUs to help them improve their finances. A top bank executive said the government was in touch with PSUs to understand their capital needs and was monitoring their finances, added report. CLICK HERE TO READ FULL REPORT.

Currently, 11 of 21 PSUs are under the RBI’s PCA framework. The list includes Allahabad Bank, Bank of India, Central Bank of India, IDBI Bank, UCO Bank, Dena Bank, Oriental Bank of Commerce, Indian Overseas Bank, Bank of Maharashtra, Corporation Bank and United Bank of India.

Meanwhile, enthused by the impact of the new insolvency and bankruptcy law, the government expects bad loan recoveries to exceed the Rs 1.80 trillion target for the current financial year, the PTI report suggested quoting a senior Finance Ministry official.

Some big accounts are in the process of getting resolved while some more are lined up for resolution under the Insolvency and Bankruptcy Code (IBC), added the report. CLICK HERE TO READ FULL REPORT.

ORIENTAL BANK 74.60 65.95 13.12
UNION BANK (I) 69.70 62.15 12.15
CANARA BANK 238.20 212.55 12.07
ALLAHABAD BANK 40.65 37.05 9.72
BANK OF INDIA 81.10 74.55 8.79
INDIAN BANK 241.40 222.30 8.59
BANK OF BARODA 107.10 98.85 8.35
ST BK OF INDIA 267.90 248.10 7.98
SYNDICATE BANK 33.50 31.20 7.37
DENA BANK 15.65 14.60 7.19
PUNJAB NATL.BANK 70.90 66.15 7.18
VIJAYA BANK 43.30 40.65 6.52
BANK OF MAHA 11.60 10.90 6.42

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