Bank stocks advance as Lok Sabha passes Banking Bill

Federal Bank (up 3.95% to Rs 517), Bank of India (up 1.52% at Rs 326.50), HDFC Bank (up 1.31% to Rs 684.50), Canara Bank (up 0.82% at Rs 476), Yes Bank (up 0.81% to Rs 471.80), IndusInd Bank (up 0.81% to Rs 433.30), Bank of Baroda (up 0.73% at Rs 855.90), IDBI Bank (up 0.68% at Rs 111.70), State Bank of India (up 0.45% at Rs 2,382), , Kotak Mahindra Bank (up 0.35% at Rs 664.90), and Punjab National Bank (up 0.31% at Rs 847). edged higher.

ICICI Bank (down 0.95% at Rs 1,137.85), Union Bank of India (down 0.55% at Rs 273.35), and Axis Bank (down 0.17% at Rs 1,348.50) edged lower.

 

The BSE Bankex was up 0.35% at 14,372. It underperformed the Sensex, which was up 97.64 points or 0.5% at 19,462.39.

The BSE Bankex index had outperformed the market over the past one month till 18 December 2012, surging 9.99% compared with the Sensex's 5.76% rise. The index had also outperformed the market in past one quarter, jumping 13.04% as against Sensex's 4.7% gain.

The Lok Sabha on Tuesday, 18 December 2012, passed the Banking Laws (Amendment) Bill, 2011, paving the way for overhauls of the banking sector that could draw investments from more foreign banks as well as local industrial companies. The Banking Laws (Amendment) Bill, 2011 proposes to give the Reserve Bank of India the power to take temporary control of private sector banks in the event of operational irregularities. It would also increase the limit on the voting rights of any one shareholder in a private bank to 26% from 10%. The cap would rise to 10% from 1% for state-run banks. The banking overhaul requires the approval of the upper house of the parliament to become law. Voting rights of 26% in a private sector bank could allow an investor to gain operational control over a bank, or at least significant influence over the board. Higher voting rights in private sector bank could also encourage foreign banks to expand in India by buying stakes in local banks, as they would have greater operational control.

In 2011, the RBI drafted rules allowing industrial firms, except those in real estate, to enter banking, but held back on their implementation, saying it would need more powers under the new regime. Tuesday's banking bill would give the RBI the power it had sought, clearing the way for the licensing regulations to take effect.

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