PSU banks trade mixed after govt unveils NARCL plan; SBI hits new high

The government has approved a guarantee of Rs 30,600 crore to be provided for the security receipts issued by the National Asset Reconstruction Company (NARCL) to buy bad loans of lenders.

Shares of public sector banks (PSBs) were trading mixed on the bourses on Friday after the government approved a guarantee of Rs 30,600 crore to be provided for the security receipts issued by the National Asset Reconstruction Company (NARCL) to buy bad loans of lenders. On Thursday, most of the PSBs had rallied between 5 per cent and 10 per cent in anticipation of the announcement.

“Finance Minister Nirmala Sitharaman on Thursday announced a formal government guarantee on the securities receipts that the planned ‘bad bank’ will issue to banks as it takes on non-performing assets from their books,” Business Standard reported. CLICK HERE FOR FULL REPORT

Among the individual stocks, state-owned giant, State Bank of India (SBI) hit a new high of Rs 471.90, up 2 per cent in intra-day trade on Friday, extending its previous day’s 4.5 per cent rally on the National Stock Exchange (NSE). The stock surpassed its previous high of Rs 467.45, touched on August 4, 2021.

Indian Bank, Canara Bank and Bank of India were up by 1 per cent each, while Indian Overseas Bank, Punjab & Sind Bank, UCO Bank, Punjab National Bank and Bank of Baroda were down in 1 per cent to 3 per cent eacxh on the NSE.

At 09:21 am; Nifty PSU Bank index was up 0.36 per cent, as compared to 0.55 per cent rise in the Nifty50 index. The PSU bank index had rallied 5.5 per cent on Thursday.

ICICI Securities believes this is one step closer towards operationalization of NARCL's ‘bad bank’ and is positive sentimentally for banks, especially PSU banks. With government guarantee on securities receipts in place it is beneficial for resolution of large stressed accounts, the brokerage firm said in a note.

“We view this as a positive development as the focus remains on faster resolution of stressed assets. This will improve the balance sheet of Banks, and the upfront cash payment would also aid in providing incremental cash flows. It will enable Banks to focus more on their core operations,” Motilal Oswal Securities said.