Home >Markets >Stock Markets >PSU banks shares fall on asset quality concerns

Mumbai: Shares of state-owned banks were trading in the red on Monday as the Reserve Bank of India (RBI) has cautioned that asset quality of scheduled commercial banks may worsen next year owing to changes in the macroeconomic scenario.

In its latest Financial Stability Report released on Friday, the central bank also warned that there remains an inherent risk of “froth"—conditions that precede a market bubble—building up in the system due to excess liquidity.

Citing factors such as an increase in slippages and declining credit growth, the central bank in its biannual commentary said bad loans of SCBs as a percentage of total loans is expected to increase to 9.9% by September 2020 from 9.3% in September 2019.

Scheduled commercial banks' (SCBs) credit growth remained subdued at 8.7% year-on-year in September 2019, though private sector banks registered double digit credit growth of 16.5%. SCBs' capital adequacy ratio improved significantly after the recapitalisation of public sector banks by the government. SCBs' gross non-performing assets ratio remained unchanged at 9.3% between March and September 2019.

Shares of Punjab & Sind Bank fell the most, down 10.2% to 20.35. Corporation Bank fell 5.7% to 24.85 and Indian Overseas Bank fell 3.84%.

State Bank of India, Bank of Maharashtra, UCO Bank, Bank of India, Allahabad Bank, United Bank of India, Union Bank of India, Punjab National Bank, Syndicate Bank, Oriental Bank of Commerce and Bank of Baroda fell 1-2%. The benchmark Sensex was 0.12% lower at 41,525.56.

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