Mumbai: Shares of banks and non-banking finance companies (NBFCs) rebounded on Tuesday hoping that Urjit Patel’s successor as Reserve Bank of India governor may re-examine the prompt corrective action (PCA) framework and special liquidity window. Nifty PSU Bank rose 2.3% while Nifty Private Bank was trading flat. The 50-share Nifty index rose 0.6%.

“We expect that the new governor may provide relief on prompt corrective action and relaxation on NPA policy," an analyst said on condition of anonymity.

On Monday, Urjit Patel resigned citing personal reasons. However, most analysts believe the unexpected resignation was due to friction between the RBI and the government on various issues, including capital adequacy norms for banks, an exit route for banks in the prompt corrective action framework, forbearance for small and medium enterprises, and an optimal RBI capital framework.

Analysts expect that the tensions have increased between RBI and government, particularly since the shadow banking crisis, which required more counter-cyclical norms to enable banks to fill the credit gap. While the previous RBI board meeting did see a diffusion of tensions, as numerous contentious issues were referred to committees, the sudden exit suggests that conflicts remain.

Among private banks, Yes Bank surged 6%, Axis Bank 3.5%, South Indian Bank 3%, RBL Bank Ltd 2%, Federal Bank 1.7%, IDFC Bank Ltd 1.1%.

Among public sector lenders, Punjab National Bank rose 5.2%, Canara Bank 2.7%, Union Bank of India 2.5%, Bank of Baroda 2.6%, Central Bank of India 2.3%, Indian Bank 2.1%, State Bank of India 2.1%, Oriental Bank of India 2%.

In NBFC stocks, Dewan Housing Finance rose 6%, LIC Housing Finance 5%, Shriram Transport Finance Ltd 5.6%, Max Financial Services Ltd 4.4%, M&M Finance 3.5%, Bajaj Finserv Ltd 2.3%, Indiabulls Housing Finance Ltd 1.2%, IIFL Holdings Ltd 1.1%, Bajaj Holdings & Investment Ltd 0.6%.

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