Banks hit after RBI’s Financial Stability Report; ICICI Bank, HDFC Bank, Yes Bank fell the most

The Indian stock market is under pressure as bank and financial stocks took a beating after the Reserve Bank of India said on July 24 in the Financial Stability Report.

The Sensex was down 238.39 points or 0.63% at 37890.51, while the Nifty was down 72.90 points or 0.65% at 11121.30.

Gross non-performing assets of scheduled commercial banks can spike to 14.7 percent of the total loans by March 2021 in a worse scenario, the Reserve Bank of India said in the Financial Stability Report on July 24. In a base case scenario, the GNPAs could rise to 12.5 percent by March next year, the RBI said.

“Macro stress tests for credit risk indicate that the GNPA ratio of all SCBs may increase from 8.5 percent in March 2020 to 12.5 percent by March 2021 under the baseline scenario; the ratio may escalate to 14.7 percent under a very severely stressed scenario,” the RBI said.

“The regulatory dispensations that the pandemic has necessitated in terms of the moratorium on loan installments and deferment of interest payments may have implications for the financial health of SCBs, going forward,” the RBI added.

“Given the fact that the impact of the moratorium is still uncertain and evolving. The exact nature of how the same will play out on the quality of banking assets. It is difficult to ascertain accurately. Therefore, this will only be ascertainable with the passage of time, and outcomes would be disseminated in the forthcoming publications of RBI, from time to time,” said the RBI report.

Bank Nifty fell over 2 percent, while ICICI Bank fell over 4 percent. Q1FY21 posted a profit of Rs 2,599.1 crore for the year, up 36.2 percent year-on-year with some share sales in general and life insurance subsidiaries. An additional Rs 5,550 crore worth of Kovid-19 related regulations have restricted profit growth.

HDFC Bank’s share price plunged more than 3 percent on July 21. After post-managing director, Aditya Puri sold Rs 843 crore worth of bank shares. According to stock exchange filings. Puri sold 7.42 million shares or 0.13 percent stake, the bank said. Post this transaction, the bank owns 3.76 lakh shares or 0.01 percent in Puri.

Among the other losers, Bandhan bank, Axis Bank, Federal Bank, IDFC First Bank, and Bank of Baroda which shed 2-3 percent.

ICICI Bank, HDFC Bank, and Axis Bank were the top index losers. Among the most active stocks on the NSE in terms of volumes are names like ICICI Bank. Where 2,52,09,525 shares were traded, followed by SBI (1,56,42,840) and Federal Bank (1,37,93,402).

YES Bank shares hit the 10 percent lower circuit after the company shares allotted in the follow-on public offer (FPO). Listed on the bores. The private sector lender raised Rs 14,272 crore through its 95 percent FPO. This issue has began on July 15 and closed two days later.

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