Bank stocks tumble on RBI red flags on NPAs; S&P BSE Bankex down

New Delhi: Bank stocks today witnessed heavy selling and settled with losses of up to 6 percent as the Reserve Bank of India (RBI) indicated worsening of non performing assets (NPA) situation. RBI in its Financial Stability Report (FSR) yesterday said the gross bad loans as percentage of total advances of banks are likely to rise from 11.6 percent in March 2018 to 12.2 percent by the end 2018-19 financial year. Shares of bank stocks tumbled in today’s trade and the S&P BSE Bankex settled at 29,308.66 points, down 1.04 percent. Bank of India shares lost 3.75 percent, Syndicate Bank fell 6.39 percent, Bank of Baroda (2.54 percent), Indian Bank (0.21 percent), UCO Bank (4.22 percent), SBI (2.06 percent) and Bank of Maharashtra (2.87 percent) on the Bombay Stock Exchange (BSE).Besides, ICICI Bank fell 3.16 percent and Axis Bank (1.25 percent). [caption id=“attachment_4499497” align=“alignleft” width=“380”]  Representational image. Reuters.[/caption] “Macro-stress tests indicate that under the baseline scenario of current macroeconomic outlook, SCBs’ (scheduled commercial banks) GNPA ratio may rise from 11.6 percent in March 2018 to 12.2 percent by March 2019,” FSR said. Referring to the 11 state-owned banks under prompt corrective action framework (PCA), the RBI said they may experience worsening of their GNPA ratio from 21 percent in March 2018 to 22.3 percent by 2018-19 end. The central bank called for greater vigilance on the domestic macro-economic front saying conditions, which pushed GDP growth to 7.7 percent in March 2018 quarter, are changing and warned that bad loan situation might worsen. Meanwhile, Kotak Institutional Equities said in a research note that “there would be very high credit costs in 2018-19 as there are too many assets chasing limited supply of external funds/ new owners”.