Doubting stock market punishes PSU banks

The Asian Age.  | RAVI RANJAN PRASAD

Business, Market

Investors are not convinced about the ability of anchor banks to absorb their weaker partners.

The mega bank merger, announced by the government last Friday, has not gone down well with investors, who dumped public sector bank shares, when the market opened after a three-day break on Tuesday.

Mumbai: The mega bank merger, announced by the government last Friday, has not gone down well with investors, who dumped public sector bank shares, when the market opened after a three-day break on Tuesday.

While analysts have largely praised the government’s vision of merging these banks based on their common technology platforms and other synergies, investors and market participants credit growth at the 10 banks, which were being merged into four, would take a back seat till the whole process of merger is over.

Reflecting the collapse in the stock prices, the Nifty PSU Bank Index fell 4.87 per cent.

The top losers in the pack included Indian Bank (-11.96 per cent), Canara Bank (-11.94 per cent), Union Bank (-10.11 per cent), Oriental Bank of Commerce  (-9.99 per cent) and Punjab National Bank (-8.94 per cent).

Investors are not convinced about the ability of anchor banks to absorb their weaker partners.

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They also feel the integration process might delay these PSU banks’ bad-loan clean-up process and slow lending approvals.

Stae-run banks battling NPAs and poor credit growth have forced the government to merge weaker and smaller banks to form large banks with scope for better credit and deposit growth. Successful merger of Dena-Vijaya banks encouraged the Centre to announce a fresh merger plan last week.

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