Mumbai: A massive sell off was triggered in bank stocks on Wednesday as new measures announced by the Reserve Bank of India (RBI) to deal with non-performing assets (NPAs) and a $1.8 billion fraud reported by the Punjab National Bank spooked investors.
On Wednesday, the sectoral index at the BSE -- S&P BSE BANKEX -- plunged by 1.62 per cent to 28,609.02 points from its previous close of 29,080.02 points.
According to market observers, the downward spiral was triggered after the RBI on Monday announced new norms to deal with the NPAs.
"The PSU banks witnessed sell-off as RBI scrapped a number of loan-restructuring schemes which may lead to further jump in provisions impacting profitability of these banks," said Vinod Nair, Head of Research, Geojit Financial Services.
Besides RBI's latest moves, the massive $1.8 billion fraud detected at one of the Mumbai branches of PNB, the second largest public sector bank in India, also spooked investors.
"PNB stocks fell 9.8 per cent as investors wondered about the impact of the fraud on the profits or book value of the bank even as they await data about the possibility and extent of recovery that is possible," Deepak Jasani, Head - Retail Research, HDFC Securities, told IANS.
"If no recovery is possible, the impact could be Rs 42-46 per share out of which the stock price has already fallen -- Rs 16 today."
On a closing basis, the scrip of PNB closed at Rs 145.80, down by Rs 15.85 or 9.81 per cent from its previous close of Rs 161.65.
The stocks of other lenders like Yes Bank, State Bank of India, Axis Bank and ICICI Bank were also impacted.
The scrip of Yes Bank closed at Rs 320.20, down Rs 14.75 or 4.40 per cent to Rs 334.95.
Stocks of SBI edged lower by Rs 11.70 or 4.06 per cent to Rs 276.80 from its previous close. The scrip of Axis Bank closed at Rs 543.95 down by Rs 18.85 or 3.35 per cent from its previous close of Rs 562.80.
ICICI Bank's stocks closed at Rs 318.55, lower by Rs 7.45 or 2.29 per cent from its previous close of Rs 326.