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Shares of state-run banks fell after the Reserve Bank of India has announced a new bad-loan-resolution framework . RBI's new rules will push more large loan defaulters to bankruptcy courts, and abolish a slew of existing loan-restructuring mechanisms.
The move will lead to spike in credit provisioning, hurt balance sheets in short-term, but will help reduce bad debts by forcing lenders to be more aggressive, say analysts.
“Credit provisions to spike up further as RBI steps up the pace for resolution of stressed assets”, says ratings agency ICRA.
Nifty PSU bank index fell as much as 2.3 per cent, and State Bank of India was down 1.8 per cent. Bank of India was the top percentage loser on Nifty PSU bank index after posting Q3 net loss due to a surge in provisions for bad loans.
Punjab National Bank fell as much as 5.7 per cent after detection a $1.77-billion worth of fraudulent transactions. Indian markets were shut on Tuesday for a holiday.
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