PNB, Indian Bank, others gain up to 2% on hopes of higher capital infusion

NEW DELHI: Banking stocks were trading up to 2 per cent higher in Wednesday’s trade ahead of the Budget announcement as hopes intensified that the government would announce higher capital infusion into the cash ban hit sector.

At 10.30 am, shares of PNB were trading 2.24 per cent higher at Rs 139 on BSE. State-run lenders Bank of Baroda and SBI jumped 2.21 per cent and 1.83 per cent, respectively. Indian Bank, Dena Bank and Bank of India were trading higher by 1 per cent each.

Among private lenders, Kotak Mahindra Bank, HDFC Bank and Axis Bank were trading with positive bias while others like Yes Bank and ICICI Bank were trading half a per cent lower.

Banking sector is one sector which has been reeling under pressure from a decade low credit offtake and rising non-performing assets (NPAs). Add to concerns is the recent cash ban, which hurt the banking activity in the quarter gone by.

To fight stressed assets, the Budget on Wednesday may announce higher capital infusion for FY2017-18. Also there are chances that because asset quality review (AQR) and demonetisation have contributed to higher bad loan provisioning in December quarter.

"The government could front-load and increase the amount considered for PSU bank recapitalisation. This would enable PSU banks to write off bad assets and comply with Basel III requirements," said Morgan Stanley in a note.

In FY17, the government had approved capital infusion of Rs 25,000 crore.