Public bank shares rise up to 6% on hopes govt will infuse more funds

Shares of public sector banks (PSBs) clocked up significant gains in mid-noon trade Wednesday, rising over 4-5 percent as against 1.2 percent gain in the BSE Bankex on reports the government is working on a comprehensive package for these banks in the backdrop of surging bad loans.

Outperforming the broader market, shares of Union Bank of India jumped 5.6 percent to Rs 155.75, Bank of India rose 5.3 percent to Rs 180.35, Bank of Baroda moved up 4.4 percent to Rs 150.60, IDBI Bank also scaled up 4.4 percent to Rs 63.50, SBI advanced 2.4 percent to Rs 269 and PNB was up nearly 2 percent to Rs 141.85.

“NPAs are simply a symptom of the underlying issues that need to be resolved,” Minister of State for Finance Minister Jayant Sinha told a gathering of private equity investors. “We are preparing a comprehensive package which we will bring out shortly.”

Recently, the stress test carried out by the Reserve Bank of India showed that gross NPAs as a ratio of total loans could rose to 4.8 percent by September from 4.6 percent in March.

The government has also agreed to inject about $3 billion into the banks this fiscal year and could double that amount next year to shore up their capital.

But private analysts reckon the banks need much more. Ratings agency Fitch estimates Indian lenders need more than $200 billion to prepare for the full implementation of new international capital adequacy rules in the next four years.

With inputs from Reuters