The Modi government's proposal to provide Rs 25,000 crore in FY2017 for recapitalisation of public sector banks (PSBs) is almost three times higher than last year's Rs 9,555 crore, but way short of market and analysts' expectations.
The news failed to make a positive impact on PSB stocks, with the country's largest lender State Bank of India falling by almost a percent to trade at Rs 155.30 at around 12.15 p.m.
In fact most of the PSU bank stocks on the NSE were down after the lower-than-expected allocation for recapitalisation.
Some projections had estimated the need for bank recapitalisation at about Rs 70,000 crore, given that most of the banks are reeling under severe stress arising out of provisioning for bad loans, leaving them with very little amount to lend.
The December quarter results of listed PSBs indicate that the cumulative gross NPAs of 24 listed state-owned banks stood at Rs 3,93,035 crore as on Dec.31, 2015, according to a PTI report. It was about 50 percent from their gross NPAs of Rs 2,61,918 crore a year ago.
It was also nearly 1.5 times of their total market value, which was about Rs 2,62,955 crore as on Feb.20.
Finance Minister Arun Jaitley's statement that the government could look at the option to reduce its stake in IDBI Bank to less than 50 percent lifted the stock, which was up 7.50 percent at Rs 59.80 at around 12.35 p.m.
â€” Ministry of Finance (@FinMinIndia) February 29, 2016