Bank stocks gain as RBI relaxes bad-loan provisioning rules

Sixteen bank stocks rose by 0.07% to 1.92% at 11:50 IST on BSE after the Reserve Bank of India allowed to utilise upto 50% of countercyclical provisioning buffer/floating provisions for making specific provisions for non-performing assets.

Meanwhile, the BSE Sensex was up 78.85 points, or 0.28% to 28,054.71.

Among PSU bank stocks, Canara Bank (up 0.78%), Union Bank of India (up 1.92%), Bank of India (up 0.5%), Punjab National Bank (up 0.64%), Syndicate Bank (up 1.03%), Andhra Bank (up 0.19%), Oriental Bank of Commerce (up 0.07%), Dena Bank (up 2.1%), and Indian Bank (up 0.9%), gained.

State Bank of India (SBI) rose 0.78% after the bank announced that the Executive Committee of the Central Board (ECCB) yesterday, 30 March 2015, authorised divestment of SBI's stake in SBI Life Insurance Company by upto 10%.

Among private sector banks, ICICI Bank (up 0.3%), IndusInd Bank (up 0.13%), Yes Bank (up 0.12%), Federal Bank (up 0.57%), Kotak Mahindra Bank (up 0.17%), and Axis Bank (up 0.69%), gained. HDFC Bank fell 0.57%.

The BSE Bankex had underperformed the market over the past one month till 30 March 2015, falling 6.81% compared with 4.72% decline in the Sensex. The index had also underperformed the market in past one quarter, declining 1.54% as against Sensex's 2.09% rise.

The Reserve Bank of India (RBI) has decided to allow commercial banks to utilise upto 50% of countercyclical provisioning buffer/floating provisions held by them as on 31 December 2014 for making specific provisions for non-performing assets, as per the policy approved by a bank's Board of Directors. Earlier, the RBI had in February 2014 allowed banks to utilise upto 33% of countercyclical provisioning buffer/floating provisions held by them as on 31 March 2013 for making specific provisions for non-performing assets. The RBI said in a notification issued yesterday, 30 March 2015, that utilisation of countercyclical provisioning buffer/floating provisions would be over and above the utilisation of countercyclical provisioning buffer/floating provisions as permitted by the RBI on 'Framework for Revitalising Distressed Assets in the Economy - Refinancing of Project Loans, Sale of NPA and Other Regulatory Measures'.

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