The stocks of PSU bank such as State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, Allahabad Bank, Indian Bank, Oriental Bank of Commerce, Union Bank of India cracked in the afternoon trades as the government ordered the closure of 35 international branches. According to several TV reports, a panel of bankers has decided to close down 35 overseas branches of PSBs (public sector banks). Further, it has been noted that will take a call on consolidation on 69 foreign branches, offices, arms and JVs. The government is looking to consolidate foreign operations of PSU banks in same geographies, the report added.
Shares of India’s largest lender by assets State Bank of India slumped nearly 2% on the news to a day’s low of Rs 262.8 while the stock of the scam-hit PNB was trading little changed, down 0.5% at Rs 100.85. Shares of Indian Bank, Andhra Bank, Allahabad Bank, Bank of India, Canara Bank and Oriental Bank of Commerce lost 1-5%. Apart from the plunge in almost all the PSU banking stocks, shares of IDBI Bank were trading higher, up by 7.5% at Rs 80.15.
The decision had come on the close heels of India’s biggest banking scam in nation’s second-largest PSU bank Punjab National Bank. The state-run lender PNB has been gripped by the massive scandal totalling Rs 12,700 crore (approximately), of which Rs 1,323 crore has increased in this week only after the bank in a late-night notification on Monday said that the quantum of fraud can increase by $204 million or Rs 1,323 crore.
PSU banks have been reeling under the immense pressure of perpetually rising NPAs (non-performing assets) from a couple of years. With the stress of heavy NPAs, the gross NPAs of State Bank of India crossed 10% of the total loans and advances int he third-quarter ended 31 December 2017. In absolute terms, SBI had nearly Rs 2 lakh crore as NPA at the end of 31 December 2017.
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