Nifty PSU Bank index records second biggest fall in 2018; PNB slips 10%

PNB, Bank of India, Oriental Bank of Commerce, Allahabad Bank and Canara Bank were down more than 5% on NSE.

Nifty PSU Bank index has dipped nearly 5% on Wednesday after the Reserve Bank of India (RBI’s) revised framework on resolution of stressed assets and the detection of about $1.77 billion fraudulent and unauthorised transactions by the Punjab National Bank (PNB) at one of its branches in Mumbai.

Nifty PSU Bank, the largest loser among sectoral indices, ended 4.8% lower at 3,307 today, recorded its second sharpest single day fall of the current calendar year 2018. Earlier on January 25, 2018, the index had slipped 5.2% as investors showed their disappointment with the government’s plan to infuse Rs 880 billion as part of its recapitalisation package for lenders.

With the today’s decline, the Nifty PSU Bank index was down 10.6% as compared to a marginal 0.28% decline in the benchmark Nifty 50 index. Nifty Bank was down 0.8%, while Nifty Private Bank up 0.5% during the period.

PNB, Bank of India, Oriental Bank of Commerce, Allahabad Bank and Canara Bank were down more than 5% today.

Among the individual stocks, PNB slipped 10% to Rs 146 on the National Stock Exchange (NSE), after the bank said on Wednesday that it  has detected fraudulent transactions worth around Rs 110 billion from one of its Mumbai branch allegedly by diamond merchant Nirav Modi, his relatives and business partner Mehul Choksi during this year. CLICK HERE FOR FULL REPORT.

Meanwhile, the revised framework on resolution of stressed assets issued by RBI is likely to increase the reported non-performing assets (NPA) levels of the banks in coming quarters, ICRA said in a press release.

“While in the short-term this will increase the pain for the borrowers as well the lenders, however the early identification of stress and resolution will prevent future ever-greening of loans and ensure a good financial health for the banking system in long-term,” said Karthik Srinivasan, Group Head, Financial Sector Ratings, ICRA.

According to CRISIL Ratings, the RBI’s revised framework for the resolution of large stressed assets has the potential to herald a big change in the approach of banks to monitoring of exposures and resolution of NPAs, and thereby strengthen the banking system.

By mandating weekly information on large delinquent accounts, by directing that a resolution plan be scripted immediately after default, and by setting stringent timeliness (180 days from default) for referring an account to the Insolvency and Bankruptcy Code process, the RBI is establishing an ecosystem where NPAs would get recognised on time and their resolutions are structurally quicker than before.

“The revised RBI framework sets in motion a change in the paradigm of stressed assets resolution. The streamlining of the NPA resolution process affords simplicity, timeliness and credibility, so is a long-term positive for the banking sector,” said Krishnan Sitaraman, Senior Director, CRISIL Ratings.

BANK	LATEST	PREV CLOSE	LOSS(%)
PUNJAB NATL.BANK	145.85	161.65	-9.77
BANK OF INDIA	133.55	144.85	-7.80
ORIENTAL BANK	103.85	112.55	-7.73
ALLAHABAD BANK	56.20	60.85	-7.64
CANARA BANK	308.80	327.80	-5.80
UNION BANK (I)	121.20	127.40	-4.87
ST BK OF INDIA	276.20	288.75	-4.35
SYNDICATE BANK	63.00	65.75	-4.18
ANDHRA BANK	46.90	48.75	-3.79
VIJAYA BANK	58.95	61.20	-3.68
CORPORATION BANK	34.50	35.80	-3.63
IDBI BANK	65.45	67.55	-3.11
INDIAN BANK	349.35	357.35	-2.24
DENA BANK	22.40	22.80	-1.75
BANK OF BARODA	165.80	168.65	-1.69
UCO BANK	29.05	29.55	-1.69
PUN. & SIND BANK	41.35	42.00	-1.55
CENTRAL BANK	68.80	69.85	-1.50
I O B	21.50	21.80	-1.38