PSU banks fall 6% amid weak markets, Basel-III concerns

MUMBAI: State-owned banks registered heavy losses on Friday amid weak market conditions, as investors grew worried over lower return on assets after Basel-III norms are implemented.

The Reserve Bank of India recently notified the international norms formulated for banks after the 2008 credit crisis. The CNX PSU Bank index traded over 4% down at 1500 hours on Friday, the biggest laggard among other sector-specific indices on NSE.

While Bank of Baroda and Syndicate Bank traded over 6% down, State Bank of India and Punjab National Bank were 4% down. Markt benchmark Nifty was down 2% at 5,075 points.

"In our view, banks with low RoA's and structurally weakening balance sheet structure will find it difficult to fulfil BASEL III requirement, resulting in loss of market share and eventual consolidation," said a note by Motilal Oswal Securities.

"Considering the fiscal health of GOI, funding PSU banks on a longer term basis is not a viable option. Thus, banks will have to improve core operating profitability to fund its growth requirement," the note added.