Nifty PSU Bank index slips 3%; PNB, Union Bank fall up to 4%, here's why

Thus far in the calendar year 2025, Nifty PSU Bank index has underperformed the market by falling 2.5 per cent, as compared to 2.8 per cent rise in the Nifty 50.

Nifty PSU Bank index today

 

Nifty PSU Bank index slipped nearly 3 per cent to 6,379.75 on the National Stock Exchange (NSE) in Tuesday’s intra-day trade as all 12 banking shares from the index were seen trading with losses, down up to 4 per cent.

 

Union Bank of India (UBI), Bank of India, Punjab & Sind Bank, Indian Overseas Bank (IOB), Central Bank of India and Punjab National Bank (PNB) were down in the range of 3 per cent to 4 per cent. State Bank of India (SBI), Indian Bank, Canara Bank, Bank of Baroda and UCO Bank were quoting lower by 2 per cent.

 

Thus far in the calendar year 2025, the Nifty PSU Bank index has underperformed the market by falling 2.5 per cent, as compared to 2.8 per cent rise in the Nifty 50.

 

At 12:31 pm; Nifty PSU Bank index was trading 2.2 per cent lower, as compared to 0.3 per cent decline in the benchmark index.  Read Stock Market Latest Updates Today LIVE

 

Key reason for PSU banks share fall

 

The Supreme Court on Friday rejected JSW Steel’s 2019 resolution plan for Bhushan Power and Steel (BPSL), declaring it as illegal, and ordered the liquidation of BPSL’s assets.

 

As per the plan, JSW had offered ₹ 19,350 crore to financial creditors and ₹ 350 crore to operational creditors of BPSL, which was paid in March 2021.

 

SBI, PNB, Bank of Baroda, Indian Bank, Canara Bank, and IOB were among the major lenders to BPSL, which was one of the “dirty dozen” companies referred to in the corporate insolvency resolution process, under the IBC, in 2017 by the Reserve Bank of India (RBI). 

 

Since the apex court has quashed the acquisition, lenders will have to return the money they recovered from JSW Steel for acquiring BPSL. This will require them to make provisions starting this quarter (Q1) of 2025–26, according to market experts.

 

Meanwhile, JSW Steel in an exchange filing said they are yet to receive the formal copy of the Order to understand the grounds for rejection in detail and its implications. “Once we receive the Order and are able to review the same along with our legal advisors, we will decide on our further course of action,” JSW Steel said.

 

At this stage, the lenders are awaiting the detailed order. After they get it, they will assess the implications and decide on the next step. Banks will have to make provisions for the amounts recovered because the funds have to be returned, said bankers Business Standard spoke to.

 

According to brokerage reports, banks recovered a total of ₹19,328 crore, with SBI recovering ₹4,028 crore, PNB ₹3,032 crore, Canara Bank ₹1,648 crore, Union Bank of India ₹1,434 crore, and Indian Bank ₹1,265 crore, the newspaper reported.

 

Meanwhile, the Department of Financial Services (DFS) has reviewed the Supreme Court’s (SC’s) judgment on JSW Steel’s acquisition of BPSL through the insolvency process, in consultation with the lenders involved, and will now seek the government’s view on how to approach the ruling and determine the next course of action, DFS Secretary M Nagaraju said on Monday in Mumbai.  ALSO READ | Can these 7 defence stocks double your money in a year? Check strategy here

 

Sector Outlook – Mirae Asset Sharekhan

 

Deposit mobilisation and asset quality to be in focus System credit growth is slowing and has declined to ~11.4 per cent year-on-year (YoY) from 16.4 per cent in FY2024 as per the latest fortnight data, mainly driven by slower deposit growth, slowdown in unsecured retail segment and a high credit-deposit ratio. Deposit growth at 10.3 per cent is lagging loan growth and stays rangebound at 10-12 per cent. 

 

Moreover, deposit growth is mainly led by time deposits rather than CASA. Margins are expected to be under pressure due to the elevated cost of term deposits, while a lower interest rate cycle will lead to yield pressure. Overall, asset quality outlook is stable to positive for the sector, except for the unsecured retail loans and MFI segment. The brokerage firm in SBI’s Q4 earnings update said that they believe banks with a robust capital base, strong asset quality, and healthy retail deposit franchises are well-placed to capture growth opportunities.