PFC, REC, IREDA, PNB, others decline up to 13%: Why PSU stocks are falling sharply today - explained

Shares of PSU stocks dropped by up to 13% as RBI imposed stricter regulations on project loans during the construction phase, with provisions set at 5%. Power financing companies like PFC and REC witnessed sharp declines.

A Ksheerasagar
First Published6 May 2024, 11:46 AM IST
At the time of writing, 54 constituents of the BSE PSU index were trading in the red.
At the time of writing, 54 constituents of the BSE PSU index were trading in the red.(AP Photo)

In Monday's session, shares of PSU stocks experienced sharp declines, with some of them plummeting by as much as 13%.

This downward trend followed the Reserve Bank's announcement on Friday proposing stricter regulations, governing lending to projects under implementation.

The RBI guidelines stipulate that a 5% general provision must be set aside for all existing and new project loans in the construction phase, i.e., before commercial operations commence. Once the project transitions to the operational phase, these provisions can be reduced to 2.5% of the funding outstanding and further to 1% under certain conditions.

Also Read: Godrej Properties shares spike 7% on highest-ever quarterly profit in Q4

These conditions include the project demonstrating a positive net operating cash flow adequate to cover current repayment obligations to all lenders, along with a minimum 20% decline in the project's total long-term debt with lenders from the outstanding amount at the time of achieving the Date of Commencement of Commercial Operations.

The proposed guidelines also outline details for stress resolution, specify criteria for upgrading accounts, and invoke recognition. Lenders are expected to maintain project-specific data in an electronic and easily accessible format, updating any changes in loan parameters promptly, but within 15 days of such changes, PTI reported. 

Also Read: Indegene IPO opens: GMP, subscription status, review, price, date, lot size, other details. Apply or not?

The RBI mandates the implementation of necessary systems for this purpose within three months of issuing these directives.

Following this update, shares of power financing companies such as Power Finance Corporation (PFC) and Rural Electrification Corporation experienced declines of 13% and 13.6%, respectively. Additionally, the shares of IREDA also saw a significant tumble of nearly 7%.

In addition, PSU banks witnessed sharp declines in today's trade, with Canara Bank, Punjab National Bank, Bank of Baroda, and Bank of India falling over 5%. The remaining eight constituents of the index are also trading in negative territory. Overall, the Nifty PSU index fell 4.3% to 7,202 points.

Also Read: Multibagger PSU stock rallies 10% on robust Q4 show over provision write-offs

At the time of writing, 54 constituents of the BSE PSU index were trading in the red, resulting in a 3.4% drop in the index to 19,760 points. The index hit an intraday of low 19,632 points, down 3.86%. 

Conversely, the RBI has issued guidelines to banks concerning their involvement in the capital markets, stressing adherence to specified regulations. The recent circular focuses on "Banks' Exposure to the Capital Market - Issue of Irrevocable Payment Commitments (IPCs)."

This action by the RBI follows adjustments in the settlement cycle introduced by stock exchanges, transitioning from T 2 to T 1 rolling settlement for equities. As a result, existing guidelines on the issuance of IPCs by banks have been reevaluated to ensure compatibility with the new settlement cycle, as reported by the ANI

 

Disclaimer: We advise investors to check with certified experts before taking any investment decisions.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.MoreLess

News in Numbers

Numbers that help you understand news better
$24 M

$13.8 B

₹313 Cr

₹773.44 Cr

34.7 M sqft

250,000

$4.5 B

First Published:6 May 2024, 11:46 AM IST
HomeMarketsStock MarketsPFC, REC, IREDA, PNB, others decline up to 13%: Why PSU stocks are falling sharply today - explained

Most Active Stocks

Tata Steel

167.05
03:57 PM | 16 JUL 2024
0.25 (0.15%)

Oil & Natural Gas Corporation

322.40
03:58 PM | 16 JUL 2024
-0.15 (-0.05%)

Bandhan Bank

198.30
03:41 PM | 16 JUL 2024
2.95 (1.51%)

Coal India

512.35
03:59 PM | 16 JUL 2024
14.4 (2.89%)
More Active Stocks

Market Snapshot

  • Top Gainers
  • Top Losers
  • 52 Week High

Natco Pharma

1,281.05
03:59 PM | 16 JUL 2024
73.2 (6.06%)

Century Textiles & Industries

2,217.55
03:48 PM | 16 JUL 2024
116.85 (5.56%)

Tata Teleservices Maharashtra

81.33
03:54 PM | 16 JUL 2024
4.23 (5.49%)

India Cements

323.05
03:55 PM | 16 JUL 2024
15.8 (5.14%)
More from Top Gainers

Recommended For You

    More Recommendations

    Gold Prices

    • 24K
    • 22K
    Bangalore
    74,318.00-453.00
    Chennai
    74,755.00928.00
    Delhi
    75,266.001,294.00
    Kolkata
    75,047.001,002.00

    Fuel Price

    • Petrol
    • Diesel
    Bangalore
    102.86/L0.00
    Chennai
    100.76/L0.01
    Kolkata
    104.95/L0.00
    New Delhi
    94.72/L0.00
    OPEN IN APP
    HomeMarketsPremiumInstant LoanMint Shorts