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Select PSU banks gain on recap hopes; Central Bank of India up 6%

Bank of Maharashtra, Central Bank of India, United Bank of India, Uco Bank, Corporation Bank, and Dena Bank were up 2% to 7% on NSE.

SI Reporter  |  Mumbai 

banks, credit, recapitalisation

Shares of select public sector undertaking (PSU) banks were trading higher by up to 7% on the BSE on hopes of central government’s bank recapitalisation announcement.

Bank of Maharashtra, Central Bank of India, United Bank of India, Uco Bank, Corporation Bank and Dena Bank were up in the range of 2% to 7% on the National Stock Exchange (NSE).

At 10:53 am; Nifty PSU Bank index was up 0.54% at 3,079 points, as compared to 0.96% rise in the Nifty 50 index.

The central government would release Rs 286.15 billion before the end of this month towards a fresh tranche of funds to recapitalise state-run banks, according to a source in the finance ministry.

Of this, United Bank of India is likely to get Rs 21.59 billion, Central Bank of India Rs 16.78 billion, Bank of India Rs 100.86 billion, Uco Bank Rs 30.56 billion, Oriental Bank of Commerce Rs 55 billion, Bank of Maharashtra Rs 44.98 billion, and Syndicate Bank Rs 16.38 billion, the Business Standard reported. CLICK HERE TO READ FULL REPORT

Finance Minister Arun Jaitley last week said that government will infuse Rs 830 billion in public sector banks in the remaining months of the current fiscal (2018-19). Among various objectives, the infusion is aimed at helping better-performing banks under PCA to come out of the category.

In the past two months, Nifty PSU Bank index outperformed the market by surging 20%, against 8% rise in the Nifty 50 index.

The Reserve Bank of India (RBI) central board discussed 4 subjects in the meeting held on 19th November 2018. The subjects include Basel regulatory capital framework, restructuring scheme for stressed MSMEs, bank health under PCA framework, and, Economic Capital Framework (ECF) of RBI.

“While the two committees will have to come out with workable solutions, the other two measures relating to MSMEs and capital adequacy will be helpful for the SME sector as well as the banking system,” CARE Ratings said in the outcome of RBI board meeting.

The weaker banks will gain from the capital adequacy relaxation for sure. In a way, these two measures will also help the liquidity situation as banks will be able to lend more while restructuring stressed loans of SMEs. They would, however, have to have their due diligence processes in place when conducting this restructuring exercise to ensure that it is done in a prudential manner, it added.

First Published: Thu, December 27 2018. 11:10 IST
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