Select banking shares rally after RBI allows banks to borrow from overseas

Uco Bank, Dena Bank, Oriental Bank, Syndicate Bank, BoI and Union Bank of India are up 5-10% on BSE.

Banking shares in focus on the bourses trading higher by up to 10% after the Reserve Bank of India (RBI) has allowed banks to borrow overseas up to 100% of their capital and swap it at a subsidized rate.

Most of public sector banks such as Uco Bank, Dena Bank, Oriental Bank of Commerce, Syndicate Bank, Bank of India and Union Bank of India are up 5-10% on BSE. Andhra Bank, United Bank of India, Indian Overseas Bank, Allahabad Bank and Central Bank of India are up 4% each.

Under the new norms, RBI has allowed swap facility for term deposits in dollar denomination ranging from 1—3 years at a concessional rate of 1% below the market rate, RBI said in a notification.

Besides, it has relaxed norms for banks to borrow funds from overseas market, up to 100% of equity capital, with upper limit of $10 million.

The concessional swap window will remain open till November 30, 2013. To avail of this facility, RBI said banks need to maintain a minimum 12% CRAR and take clearance from their respective board.

Meanwhile, private sector banks like YES Bank, ICICI Bank, Kotak Mahindra Bank and HDFC Bank are trading lower by less than 2% on BSE at 1140 hours.