Banking stocks were under heavy pressure during Tuesday’s trading session this month as the Reserve Bank of India (RBI) has warned about a double-digit incline in gross non-performing assets (GNPA) till September 2021. Investors have turned cautious as this will lead to an increase in impact earnings of the banking region led by a bigger portion from the provisions and worsening of the asset quality.
At around 11.31 am on Tuesday, the Nifty Bank was trading at 31,896.35 down to 102.55 points or up to 0.32%. The index has plunged to an intraday hold as low as 31,725.85. The private banks witnessed the most pressure on selling as compared to the state-owned banks. Nifty PSU Bank was trading at 1,818.85 up to 0.91% and Nifty Private Bank fell up to 0.49% at 17,613.20.
Only Bandhan Bank and Nifty Bank were the top performers that went down almost 3% followed by Kotak Bank which fell over by nearly 2%. ICICI Bank and IndusInd Bank fell over by nearly 1% each. Meanwhile, RBL Bank slightly jumped. Looking on the positive front, IDFC First Bank led the pile flooding by 4.5% following a gain of 1% Bank of Baroda. Stocks like HDFC Bank, SBI, Axis Bank, PNB, and Federal Bank recorded a rise marginally.
RBI in its Financial Stability Reports by January 2021as mentioned by Macro-stress tests which are for the credit risk shows that SCBs’ GNPA ratio may improve 7.5% from the present to 13.5% between September 2020 to September 2021 under the baseline situation. If the macroeconomic environment would decay then the ratio may witness a shift forward to 14.8% under the drastic stress situation. The need of the hour is for banks to evaluate their respective stress situations and simply follow it up with gauges to boost the capital proactively.