Select finance stocks fall after new RBI guidelines on infra lending

Power Finance, REC, LIC Housing, Shriram Transport Finance and HDFC are down 2-6% on the BSE.

Shares of select finance companies are trading lower by up to 6% on the Bombay Stock Exchange (BSE) after the Reserve Bank of India (RBI) issued a fresh set of guidelines for infrastructure sector lending by the banks.

To boost demand for infrastructure and housing, RBI said that banks would not have to maintain cash reserve ratio (CRR) or statutory liquidity ratio (SLR) for the funds raised through bonds which are issued with an aim to give credit to these sectors.

Also, banks will not have to comply with the priority sector lending targets for such funds.

Among the individual stocks, Power Finance Corporation (down 6% at Rs 279), Rural Electrification Corporation (down 5.4% at Rs 325) and LIC Housing Finance (down 4.3% at Rs 307) have fallen more than 4% on the BSE.

Shriram Transport Finance and Housing Development Finance Corporation (HDFC) are down 2% each at Rs 887 and Rs 962 respectively.

Meanwhile, UBS downgrades HDFC to "neutral" from "buy" and cuts price target to Rs 1,075 from Rs 1,100.

The investment bank says HDFC could be impacted by more aggressive pricing on loans by banks, while competition to raise long-term bonds could push up long-term rates, the Reuters report suggests.