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Investors knocked down shares of large public sector banks after the government unveiled its plan to merge several of the lenders, amid concerns that the integration process might delay its bad-loan clean up and slow lending approvals.
Read more:Govt banks on big bang mergers as GDP tanks
The four key large lenders at the centre of the merged groups - Punjab National Bank , Canara Bank , Union Bank of India and Indian Bank - fell on Tuesday as investors fretted over the impact of absorbing their weaker peers. The mergers were announced after the market shut on Friday and Monday was a public holiday.
While the Modi government is keen for banks to give more loans to boost an economy growing at its slowest in six years, the timing of the mergers means that management attention may shift to realigning resources and processes. That could leave them little time to focus on their key immediate task of cleaning up the worst stressed-asset ratio among major economies.
Related news:India's GDP growth slumps to 5% in April-June quarter
As of 10.35 am, Punjab National Bank was down 8.16 per cent, Canara Bank 6.78 per cent, Union Bank of India 6.2 per cent, Indian Bank 6.64 per cent, Oriental Bank of Commerce 5.44 per cent. However some of the weaker lenders shares jumped - United Bank of India rose 1.82 per cent, Syndicate Bank 0.46 per cent, Andhra Bank 2.53 per cent, and Corporation Bank 2.65 per cent.
Get all the stock market updates, live here:Equity indices down 1% in early session
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