Bank stocks were down after a high-level committee on restructuring stressed assets and creating more value for public sector banks has suggested a transparent market-based solution with a focus on asset turnaround to ensure job protection and creation.

Accepting to the report submitted on Monday by the committee headed by Sunil Mehta, Non-Executive Chairman of Punjab National Bank, Interim Finance Minister Piyush Goyal said the recommendations are fully compliant with RBI regulations, and that there is no proposal to create a “bad bank”.

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Nifty PSU bank index fell as much as 0.95 per cent; IDBI Bank Ltd slumped as much as 6 per cent. Top lender State Bank of India dropped 0.25 per cent, and Punjab National Bank dropped 1.7 per cent. Private-sector lenders ICICI Bank Ltd was down 0.8 per cent and Kotak Mahindra Bank Ltd 0.33 per cent.

“Market is awaiting clarity on how the investment fund will be funded, before making conclusions for stock movements. It's a move in the right direction to solve the NPA issue,” said Siddharth Purohit, research analyst, SMC Institutional Equities

According to CLSA analysts, weaker PSUs (public sector undertakings) will benefit more from NPL resolution, but the brokerage is sceptical of their franchises and hence prefer corporate private banks (ICICI) and tier I PSU banks (SBI).

 

(With inputs from Reuters)