CNX PSU Bank index surges 5% on government capital infusion plan

SBI, Union Bank, IDBI, Canara Bank, Allahabad Bank, Bank of India, Oriental Bank & Bank of Baroda were up 5%-7%.

Banking shares mainly public sector undertakings (PSU) were trading higher by up to 7% on the bourses after the government proposed to infuse Rs 70,000 crore in PSU banks over four years.

Union Bank of India (Rs 176), IDBI Bank (Rs 66.45) and Canara Bank (Rs 281) were up 7% each, while State Bank of India (up 6% at Rs 272), Allahabad Bank (up 5% at Rs 92.55), Bank of India (up 5% at Rs 165), Oriental Bank of Commerce (up 5% at Rs 172), Bank of Baroda (up 5% at Rs 176) and Andhra Bank (up 4% at Rs 74.60) were the other major gainers on the National Stock Exchange (NSE).

At 02:31 PM, the CNX PSU Bank index was up 5.3% compared to a 1.44% rise in the CNX Nifty. The PSU bank index had underperformed the market by declining 24% compared to a 1.7% rise in the benchmark index till yesterday.

As part of the bank recapitalization plan, the government proposes to infuse Rs 25,000 crore in this fiscal, which is much higher than the amount of Rs 7,940 crore earmarked in this year's Budget. The proposal calls for infusion of Rs 25,000 crore in FY17 and Rs 10,000 crore each in FY18 and FY19.