PSU Bank Shares Surge On Govt’s Recapitalization Announcement

Shares of public-sector banks gained in trade on Monday morning over the government's recapitalisation buzz. On Friday, post market hours, Finance Minister Nirmala Sitharaman announced a round of measures to aid the slowing Indian economy, which included a Rs 70,000 crore upfront package towards bank recapitalisation to tackle liquidity crunch in the financial sector.

All 13 banks listed on Nifty PSU Bank index surged from 5 to 12 percent in morning trade. Allahabad Bank's share price gained nearly 12 percent to Rs 35 apiece, Bank of Baroda rose 7 percent to Rs 99.90, Bank of India stock rose by 6 percent to Rs 68.35, State Bank of India shares gained 6.2 percent to Rs 288 while Syndicate Bank shares surged 10 percent to Rs 32.75 apiece.

On Friday, Sitharaman said that the government will release Rs 70,000 crore upfront and additional funds to the tune of Rs 5 lakh crore to public sector banks to induce liquidity. It was also announced that banks have agreed to pass on the benefits of RBI's repo rate cut to its customers. EMIs on housing, auto and other retail loans will reduce after the direct linking of loan rates to repo rates, the government said.

Further, to bring transperancy, improve efficiency and reduce harassment, it was announced that public sector banks will have to return the loan documents to customers in 15 days and also facilitate an online tracking medium to check the status of their loan applications.