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Shares of state-run banks jumped after the government had on Friday set up a panel of experts to explore mechanisms for resolving burgeoning bad debts plaguing the financial sector.
The possibility of floating an asset reconstruction company and/or an asset management company for faster resolution of stressed assets, need for consolidation to achieve global scale, setting up oversight committees for faster credit decisions and increasing flow of credit were among a host of issues taken up by public sector bank chiefs from the Western and Southern regions at a brainstorming session on Friday.
Nifty PSU bank index gained as much as 1.9 per cent to its highest since April 10. Fraud-hit Punjab National Bank was the top percentage gainer on Nifty PSU bank index. The stock jumped as much as 4.7 per cent to Rs 94.70, highest in over a month. Canara Bank was up 1.5 per cent, while Bank of India gained 1.4 per cent.
“We believe the slow IBC (Insolvency and Bankruptcy Code) process, poor power sector metrics with high levels of stress and interrupted credit flow is forcing the hand of the Government,” Jefferies analysts wrote in a note, adding that banks with poor asset quality rally sharply even if for a day.
(With inputs from Reuters)
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