PSU banks rally on RBI move, shares surge to 12.5%

Mumbai: Shares of state-run banks soared by up to 12.5 percent Wednesday after Reserve Bank announced amendments to recognise more balance sheet items as common equity tier-I capital which will help unlock up to Rs 35,000 crore for these lenders impacted by asset quality troubles.

Corporation Bank soared 12.56 percent, SBI zoomed 11.50 percent, Indian Bank (9.42 percent) and Bank of Baroda (6.65 percent) on BSE.

SBI was also the top gainer among 30-Sensex blue-chips.

Among others, shares of Bank of India climbed 7.32 percent, Canara Bank rose by 7.08 percent, Punjab National Bank went up by 6.65 percent.

"Market participants welcomed RBI's easing of rules to allow lenders to bolster capital ratio by including reserves associated with property revaluations and foreign currency translations in the calculation of common equity tier I capital. Banking stocks were as a result on a high today," said Shreyash Devalkar, Fund Manager Equities, BNP Paribas MF.

"RBI has made some amendments to the treatment of certain balance sheet items for the purposes of determining banks' regulatory capital. The review was carried out with a view to further aligning the definition of regulatory capital with the internationally adopted Basel III capital standards," it had said in a press release yesterday.

The changes introduced yesterday include recognition of revaluation reserves arising from change in the carrying amount of a bank's property consequent upon its revaluation as common equity tier-I capital instead of the earlier tier 2 capital, it said, adding that these would continue to be reckoned at a discount of 55 percent.

The amendments came after a lower-than-expected provision for bank recapitalisation in the budget for 2016-17 at Rs 25,000 crore.

Meanwhile, in the broader market the BSE Sensex went up by 463.63 points to settle at 24,242.98.