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Shares of leading state-run banks fall after recapitalisation plan

Thursday January 25, 2018 12:28 PM, Agencies

SBI Share

Stakes of State Bank of India (SBI) and other big state-run banks fell on Thursday as they stood to receive less money than investors had expected from the government's much-awaited recapitalisation plan, Reuters reported today morning.

On the other hand, smaller state-run lenders such as UCO Bank gained, as analysts said they would receive more funds than expected.

The government pledged on Wednesday to inject nearly $14 billion (Rs. 88,140 crore) combined into all but one state-run lender by March in return for them implementing reforms, in a bid to boost lending and tackle a record bad debt problem.

But the government also said lenders must implement a series of reforms to get the funds, including improving due diligence, allowing specialised monitoring for loans above Rs. 250 crore ($39.35 million), and limiting the number of lenders that can club together to dole out loans.

"We believe this is overall positive for the banking sector, but not exactly in tune with Street expectations," Jefferies, a global investment banking firm, said in a note on Wednesday.

It said smaller lenders already closely monitored by the central bank had received more funds while the bigger and healthier banks would benefit less.

"This is in contrast to market expectations of bigger/healthier banks receiving a higher share of capital," Jeffries said.

The Nifty PSU bank index was trading down 2.7 per cent at 10:25 am. State Bank of India shares were down 2.7 per cent, Punjab National Bank was down 3.5 per cent while Bank of Baroda was down 3.6 per cent.

Smaller banks however gained. UCO Bank was up 5.7 per cent, United Bank of India rose 1.4 per cent and Indian Overseas Bank was up 1.7 per cent.

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