Bank stocks rally up to 6% as RBI eases provisioning norms

MUMBAI: Bank stocks were in huge demand on Thursday, rising by up to 6 %, after the Reserve Bank allowed them to exclude from provisioning stressed loans of certain companies in the fourth quarter numbers. This will help ease burden on banks to some extent and support their bottomline.

About two dozen companies which have been trying to repay loans by selling their assets or some of their subsidiaries have been excluded from defaulters list.

Shares of ICICI Bank soared 6.26 %, Punjab National Bank 5.10 % and Federal Bank 4.55 % on BSE. Among others, SBI went up by 3.68 %, Bank of Baroda (3.68 %) and Axis Bank (2.08 %). ICICI and SBI were the top gainers among the 30-stock Sensex components. The BSE bank index rose 1.95 % to end at 18,951.46. Buying in banking stocks also buoyed broader market sentiment, where the benchmark Sensex rose 36.20 points to end at 25,880.38.

"After reviewing accounts which were under asset quality review, RBI felt some of the accounts can be standardised. They have asked banks to make them standard," said a senior bank official from a staterun bank, adding that some of the companies falling under the category include Jaiprakash Associates Ltd. The group had an estimated debt of around Rs 75,000 crore as of 31 March 2015.

About 150 entities including Jaiprakash Associates were classified as non-performing assets during the last quarter after the Reserve Bank of India's stringent asset quality review (AQR) came into effect.

AQR undertaken by the RBI last December has resulted in a spike in bad assets with lenders recognising over Rs 1 lakh crore of bad assets in the December quarter alone.