Bank stocks tumble on RBI red flags on NPAs

Bank stocks on Wednesday witnessed heavy selling and settled with losses of up to 6 per cent as RBI indicated worsening of NPA situation.

RBI in its Financial Stability Report (FSR) yesterday said the gross bad loans as percentage of total advances of banks are likely to rise from 11.6 per cent in March 2018 to 12.2 per cent by the end 2018-19 financial year.

Shares of bank stocks tumbled in today's trade and the S&P BSE Bankex settled at 29,308.66 points, down 1.04 per cent.

Bank of India shares lost 3.75 per cent, Syndicate Bank fell 6.39 per cent, Bank of Baroda (2.54 per cent), Indian Bank (0.21 per cent), UCO Bank (4.22 per cent), SBI (2.06 per cent) and Bank of Maharashtra (2.87 per cent) on BSE.

Besides, ICICI Bank fell 3.16 per cent and Axis Bank (1.25 per cent).

"Macro-stress tests indicate that under the baseline scenario of current macroeconomic outlook, SCBs' (scheduled commercial banks) GNPA ratio may rise from 11.6 per cent in March 2018 to 12.2 per cent by March 2019," FSR said.

Referring to the 11 state-owned banks under prompt corrective action framework (PCA), the RBI said they may experience worsening of their GNPA ratio from 21 per cent in March 2018 to 22.3 per cent by 2018-19 end.

The central bank called for greater vigilance on the domestic macro-economic front saying conditions, which pushed GDP growth to 7.7 per cent in March 2018 quarter, are changing and warned that bad loan situation might worsen.

Meanwhile, Kotak Institutional Equities said in a research note that "there would be very high credit costs in 2018-19 as there are too many assets chasing limited supply of external funds/ new owners"