PSU banks gain ahead of Union Budget; SBI up 3%

SBI, BOI, Indian Overseas Bank, Canara Bank, BOB and Allahabad Bank were up more than 2% each on the NSE.

Shares of public sector undertaking (PSU) banks are  trading higher on the bourses in early trades amid hopes that the Finance Minister would announce higher amount towards recapitalisation in the Union Budget 2016 today.

State Bank of India (SBI), Bank of India (BOI), Indian Overseas Bank (IOB), Canara Bank, Bank of Baroda (BOB) and Allahabad Bank were up more than 2% each. IDBI Bank, Union Bank of India, Punjab National Bank, Syndicate Bank, Andhra Bank and Oriental Bank of Commerce were up 1%-2% on the NSE.

At 09:52 AM, the Nifty PSU Bank index was up 2.7% as compared to 0.12% decline in the Nifty 50 index.

Moody's Investors Service says that the credit profiles of Indian public sector banks will worsen, if the government does not revise upwards its capital infusion plan for the banks in the budget to be presented on 29 February 2016.

In line with Moody's view on the banks' asset quality, Moody's estimates that the 11 public sector banks' external capital requirements remain unchanged, at Rs 1.45 trillion for the four fiscal years ending 31 March 2016 to 31 March 2019 (FY2016-FY2019).

Among the individual stocks, State Bank of India (SBI) is trading higher by nearly 3% at Rs 161 on the NSE after the state-owned lender received shareholders approval to raise up to Rs 15,000 crore by public issue or overseas issuance of shares.

The issue will be subject to the condition that the Government shareholding in the bank's equity share capital does not fall below 52% at any point of time, SBI said in a statement.

The money can be raised by either of the ways including public issue, rights issue or private placement, such as qualified institutional placement (QIP) or Global Depository Receipt or American Depository Receipt or any another mode or a combination, as may be decided by the Board, it added.

The fund to be raised will help the bank to meet global risk norms under Basel III, which the banks needs to be fully compliant with by March 2019.