PSU Banks steal the limelight

It’s a great day for PSU banks on the bourses today. Indian Overseas Bank, BoB, Bank of Maharashtra, PNB, Indian Bank, Corporation Bank, Canara Bank, Andhra Bank, Oriental Bank, Syndicate Bank – all have hit a new 52-week high today. SBI is currently less than Rs.2 away from hitting a new high.

The reason for this love for PSU Banks is the approval of a new framework for NPAs. Though the fine print is awaited,  it is indicated that the new NPA resolution policy  may involve amendment to the Banking Regulation Act through the ordinance route.

News is that the new policy will allow banks to take a haircut within permissible limit and a new formula is being put in place.

Under the agreed policy, the oversight committee (OC) will have special powers to resolve NPAs and it is the OC that will recommend the extent of haircuts that banks can take using this new formula.

The new NPA resolution policy is now awaiting approval from the President.