State-run banks stocks gain as much as 11% on RBI panel report

May 14 2014, 19:03 IST
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SummaryCanara Bank soared 10.68 pct, while Bank of Baroda jumped 9.22 pct and Bank of India surged 8.21 pct on the BSE.

Shares of state-run banks today ended as much as 11 per cent higher after an RBI panel report said the government should reduce holdings in PSU lenders to under 50 per cent.

Canara Bank soared 10.68 per cent, while Bank of Baroda jumped 9.22 per cent and Bank of India surged 8.21 per cent on the BSE Sensex.

Shares of IDBI Bank rose by 5.61 per cent, while PNB was up 4.46 per cent, Oriental Bank of Commerce (3.97 per cent) and SBI (0.29 per cent). "Noticeable activity was witnessed in shares of state-run

banks after the Reserve Bank of India panel report stated that the government should reduce holdings in PSU lenders to below 50 per cent," said Jayant Manglik, President-retail distribution, Religare Securities Limited. The government should cut its holding in public sector banks to under 50 per cent, said the report by a Reserve Bank of India panel yesterday, criticising the way in which the lenders are being governed.

Headed by ex-chairman of Axis Bank PJ Nayak, the panel said that governance at the 26 Public Sector Banks (PSBs) suffers due to several "externally imposed constraints" like dual regulation by the RBI and finance ministry and external vigilance by agencies like the CVC and CAG, among others. "If the government stake in these banks were to reduce to less than 50 per cent, together with certain other executive measures, all these external constraints would disappear," the report said.

It added: "This would be a beneficial trade-off for the government because it would continue to be the dominant shareholder and, without its control in banks diminishing, it would create the conditions for its banks to compete more successfully."

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