Bank Nifty surged over 8 percent at close on February 1 and outperformed all other sectors after Finance Minister Nirmala Sitharaman said the government would infuse Rs 20,000 crore into public sector banks (PSBs) in 2021-22, to meet the regulatory norms.
For the current financial year also, the government had made a provision of Rs 20,000 crore for recapitalisation.
She proposed to divest two PSU banks and one general insurance company in FY22.
Banking stocks rallied after Finance Minister Nirmala Sitharaman has announced the setting up of an entity to address the stressed assets of banks. The organization will be set up through an Asset Reconstruction Company (ARC) model, she said in the 2021 Budget Speech. Details of the proposals are still awaited.
This institution, what is commonly known as ‘bad bank’, will be a major boost for bad asset resolution in the financial system and has been in discussions for long. Banks can transfer bad assets to this entity at a discount. Experts will then attempt for a resolution through a professional approach, while originating banks can focus on new business.
Bank Nifty index jumped over 2,000 points intraday led by IndusInd Bank which surged 13 percent while ICICI Bank which spiked 12 percent followed by State Bank of India which jumped 10 percent. HDFC Bank added 5 percent while Bank of Baroda and RBL Bank were the other gainers.