Nifty PSU Bank plunges 6% in a week, six stocks including PNB, Canara Bank tumble by over 9%; what's causing the fall?
Also Read: Why is Indian stock market falling for five straight sessions? Amid this backdrop, the Nifty PSU Bank index saw a significant decline of 6.30% in a week, falling from 7,600 points to the current trading level of 7,108 points. Notably, stocks like Punjab National Bank and Canara Bank experienced the most substantial fall during this period, losing 12% and 11.4% of their value, respectively.
Other stocks, including those of the Central Bank of India, Bank of India, Indian Overseas Bank, and UCO Bank, also witnessed declines of over 9%. Meanwhile, remaining stocks like Punjab & Sind Bank, Bank of Maharashtra, Union Bank of India, Bank of Baroda, and Indian Bank faced decreases ranging between 5% and 8.5%.
Contrarily, SBI's stock saw a more moderate decline of about 2%. Analysts have pointed out that if these proposed norms are enforced, they could significantly impact lenders' margins.
"We believe the draft norms are punitive toward incremental and existing project lending," and state-owned lenders will be most exposed if the norms get implemented, Nomura analysts said in a note. Also Read: Mint Primer | Infra financing guidelines: Why are banks upset? Macquarie analysts said the new provisioning requirements apply retrospectively and not to incremental loans.
"We think this will have two implications, where provisioning requirements will go up for lenders, affecting their profitability, and these companies may ration credit to project finance, further postponing the capex recovery," they added. IIFL Securities estimates that the impact of 5% standard asset provisioning will result in banks making additional provisions of 0.5–3% of their net worth and a hit of 7–30 basis points on common equity tier 1 capital.
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