Bank stocks gain after RBI issues instructions on trading in priority sector lending certificates

Ten bank stocks gained 0.01% to 1.17% at 11:00 IST on BSE after the Reserve Bank of India issued instructions on trading in priority sector lending certificates (PSLCs).

The Reserve Bank of India issued the instructions after market hours yesterday, 7 April 2016.

Meanwhile, the BSE Sensex was up 25.77 points, or 0.1%, to 24,711.19.

Among public sector banks, Punjab National Bank (up 1.17%), Bank of Baroda (up 0.17%), State Bank of India (SBI) (up 0.77%), Union Bank of India (up 1.16%), and Canara Bank (up 0.66%) gained. Bank of India was flat.

Among private sector banks, HDFC Bank (up 0.18%), ICICI Bank (up 1.52%), Kotak Mahindra Bank (up 0.17%), Yes Bank (up 1.1%), and IndusInd Bank (up 0.01%) edged higher. Axis Bank dropped 0.9%.

While releasing the instructions, S S Mundra, Deputy Governor, Reserve Bank also launched a platform to enable trading in the certificates through its core banking solution (CBS) portal (e-Kuber). All scheduled commercial banks (including regional rural banks), urban co-operative banks, small finance banks (when they become operational) and local area banks are eligible to participate in the trading.

Four kinds of PSLCs, namely, PSLC-agriculture, PSLC-small & marginal farmers, PSLC-micro enterprises and PSLC-general can be bought and sold via the platform. The certificates will have a standard lot size of Rs 25 lakh and multiples thereof. There will be no transfer of credit risk on the underlying and the settlement of funds will be done through the e-Kuber portal. The detailed user guidelines for trading on the platform are also available on the portal.

The Reserve Bank of India had comprehensively revised the priority sector guidelines in April 2015 which provided for the introduction of PSLCs as a mechanism to incentivise banks having surplus in their lending to different categories of priority sector. On lines of carbon credit trading, the goal of PSLCs is to allow market mechanism to drive priority sector lending by leveraging the comparative strength of different banks. For instance, a bank with an expertise in lending to small farmers can overperform there and get benefit by selling its over performance through PSLCs. Another bank that is better at lending to small industry can buy these certificates while selling PSLCs for micro enterprise loans.

The BSE Bankex had outperformed the market over the past one month till 7 April 2016, gaining 0.98% compared with 0.16% decline in the Sensex. The index had, however, underperformed the market in past one quarter, falling 3.42% as against Sensex's 0.67% fall.

Powered by Capital Market - Live News