Banking stocks are under pressure for the second day in a row after the Reserve Bank of India (RBI) released the final guidelines regarding the Basel-3 norms on May 2.
The banks will have also to achieve a minimum Core Equity Tier-I capital adequacy (CET1) of 5% by FY2014, which in a staggered manner will then have to be increased to 8% by FY2018.
The bank Nifty, which tracks the movement of banking shares, hits three-month low is down by 3% at 9,835 points, compared with less than 2% fall in the benchmark index Nifty in late noon trades.
In past two trading days, the bank Nifty lost 472 points.
Among the individual stocks State Bank of India, ICICI Bank, Punjab National Bank, Axis Bank and Bank of Baroda are trading lower by 4-6% on the National Stock Exchange (NSE).
“The immediate impact is restricted to few smaller banks. However, in the medium-term the Basel 3 guidelines imply significant capital shortage for the Indian Banking system,” Angel Broking said in a recent report.
By the end of FY2018, as the minimum CET1 requirement itself moves to 8%, the research firm is believe most of the banks would look to maintain closer to 9-10% CET1 capital adequacy.