Shares of small private sector banks were on song on the bourses on Monday after RBI Governor Raghuram Rajan indicated that rules for foreign banks to enter India, and even acquire existing banks, would be liberalised.

The appetite for stocks of private banks touched such a feverish pitch that trading in shares of Lakshmi Vilas Bank hit the upper circuit of 19.94 per cent at Rs 77.60 on the NSE and remained locked.

Rajan, while speaking in Washington on Saturday, was quoted as saying that there’s “going to be a big, big opening because one could even contemplate taking over Indian banks, small Indian banks and so on.”

He was stated to have said that the entry norms for foreign banks would be unveiled in the coming weeks.

Stocks of small private sector banks such as Karur Vysya Bank, Karnataka Bank, South Indian Bank, Lakshmi Vilas Bank, City Union Bank and Federal Bank witnessed a huge surge in buying. The positive vibes created by the Governor’s talk were so strong that they even negated the possibility of an interest rate cut receding further because of strong WPI numbers.

Shares of Karur Vysya Bank closed 7.01 per cent higher at Rs 348.15, while Karnataka Bank shares gained 16.26 per cent to end at Rs 108.30 and South Indian Bank shares (face value Re 1) rose 10.41 per cent to close at Rs 21.75.

City Union Bank shares gained 6.23 per cent to close at Rs 48.60. Shares of Kerala-based Federal Bank zoomed 6.91 per cent to Rs 348.75 and Development Credit Bank shares gained Rs 2.85 to end the day Rs 51.95. Dhanlaxmi Bank soared 10.22 per cent to close at Rs 46.90.

>yegya.narayanan@thehindu.co.in

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