PSU bank stocks rise as RBI announces scheme for sustainable structuring of stressed assets

Stocks of eight public sector banks were up 1.7% to 4.2% at 11:18 IST on BSE after the Reserve Bank of India announced a scheme for sustainable structuring of large borrowal accounts which are facing severe financial difficulties.

Punjab National Bank was up 4.2% at Rs 86.45. State Bank of India was up 1.7% at Rs 205.80. IDBI Bank was up 2.1% at Rs 68.05. Union Bank of India was up 2.7% at Rs 121.85. Bank of Baroda was up 1.6% at Rs 148.30. Bank of India was up 2.4% at Rs 89.60. Oriental Bank of Commerce was up 3.5% at Rs 92.30. UCO Bank was up 2.6% at Rs 37.10.

Stocks of major private sector banks were mostly in the red. Axis Bank was off 0.7% at Rs 527.65. HDFC Bank was off 0.6% at Rs 1,145.50. IndusInd Bank was off 0.4% at Rs 1,103.40. Kotak Mahindra Bank was off 0.4% at Rs 752.75. ICICI Bank was up 0.8% at Rs 246.05. Yes Bank was up 0.16% at Rs 1,066.15.

The BSE's banking sector index BSE Bankex was up 25.05 points or 0.12% at 20,187.87, outperforming the S&P BSE Sensex. The Sensex was currently off 30.03 points or 0.11% at 26,366.74.

The scheme for sustainable structuring of stressed assets or S4A is an optional framework for lenders for the resolution of large stressed accounts. The S4A envisages determination of the sustainable debt level for a stressed borrower and bifurcation of the outstanding debt into sustainable debt and equity/quasi-equity instruments which are expected to provide upside to the lenders when the borrower turns around. The S4A is aimed at providing an avenue for reworking the financial structure of entities facing genuine difficulties, according to a Reserve Bank of India (RBI) statement.

The S4A can be implemented only where a project has already commenced commercial operations. Another condition set by the Reserve Bank of India (RBI) for implementation of S4A is that the aggregate exposure (including accrued interest) of all institutional lenders in the account is more than Rs 500 crore (including rupee loans, foreign currency loans/external commercial borrowings. The debt under stress also should be sustainable debt.

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