PSU banks rally on likely clearance of first tranche of capital infusion

NEW DELHI: Public sector banking stocks rallied on Monday on expectations that the government would shortly announce the first tranche of capital infusion as per the Budget 2016 announcement.

The first tranche of the Rs 25,000 crore capital infusion scheduled for the financial year 2016-17 may be announced on Monday, media reports said.

According to reports, the fund infusion would lead to Rs 10,000 crore addition to banks' balance sheets. The move is aimed at easing the pain in PSU banks’ balance sheets due to surging bad loans.

Gross non-performing assets stood at 7.6 per cent at the end of March 2016. Rating agency Fitch said the Indian banking industry requires $90 billion to meet capital requirements under the Basel III norms.

Shares of State Bank of India closed 2.84 per cent, that of Bank of India 5.41 per cent, Punjab National Bank 9.24 per cent and Union Bank of India 4.24 per cent.

The Nifty PSU Bank index, a gauge of public sector lenders on the NSE, closed 3.85 per cent.