Coal block allocation: PSU banks under pressure on asset quality concerns

IDBI Bank, BOI, Canara Bank,Allahabad Bank, PNB, Andhra Bank, Syndicate Bank, OBC, BOB and SBI are down 2-5%.

Banking shares mainly public sector undertakings (PSU) are under pressure falling by up to 5% on concerns of asset quality due to their exposure to coal mines.

The Supreme Court today cancelled all coal block allocations except for government-run blocks that operate on a non-JV basis. The public sector banks have the high exposure to the power and iron & steel sectors.

IDBI Bank, Bank of India and Canara Bank have dipped 5% each, Allahabad Bank, Punjab National Bank, Andhra Bank, Syndicate Bank, Oriental Bank of Commerce, Bank of Baroda and State Bank of India are down 2-3% on National Stock Exchange (NSE).

The NSE CNX PSU Bank index, the largest loser among sectoral indices, is down 2.8% compared to 0.27% decline in benchmark CNX Nifty at 1510 hours. According to a report by Karvy, as of June this year, the banking sector had exposure of Rs 5 lakh crore (8.8% of non-food credit) to the power sector, against 4.3% in March 2008.