NEW DELHI: Banking stocks were reeling under pressure on Monday after Prime Minister Narendra Modi asked banks to prioritise their lending towards the poor and middle class. Reacting to the announcement, the NSE Nifty PSU Bank index slipped in the red and was trading down by 1.63 per cent in early trade, while the NSE Nifty Private Sector Bank index was down by 0.65 per cent.
The country’s largest lender, State Bank of India BSE -2.74 % (SBI) on Sunday slashed marginal cost of funds based lending rate (MCLR) by 0.9 per cent from 8.90 per cent to 8 per cent for one-year tenure, the bank said in a statement. The scrip was trading nearly 1.54 per cent down at Rs 246.35 around 9.40 am (IST).
Following it, other public sector lenders Punjab National Bank BSE -1.47 %
(PNB) and Union Bank of India (UBI) also cut the benchmark interest rate by up to 0.90 per cent. PNB has cut its one-year MCLR rate by 0.7 per cent to 8.45 per cent from 9.15 per cent. Shares of the bank were trading down by 0.82 per cent at Rs 114.50 at the same time. However, Union Bank was trading almost flat at Rs 123.15.
Other public sector lenders such as Bank of Baroda BSE -2.58 %
, OBC, Bank of India, IDBI and Canara Bank were down by 1.11 per cent, 0.47 per cent, 0.47 per cent, 0.43 per cent and 0.38 per cent, respectively.
On the other hand, private sector bank like ICICI Bank, HDFC Bank, Kotak Mahindra Bank, YES Bank and IDFC Bank were down between 0.50 per cent and 0.83 per cent.
In a chat with ETNow, Arvind Sanger, Managing Partner, Geosphere Capital said, “The banks lowering the lending rate are good for ultimate demand but at the same time, it is going to cause a hit on banks.”
Mayuresh Joshi, Fund Manager, Angel Broking said, “The announcement by the Prime Minister is a welcome move for the sector. However, it is not just banks, other sectors will also be affected with the announcement. At present, we are looking at what fine print the Reserve Bank comes out in these policy announcement.”
The Prime Minister on December 31 announced that loans of upto Rs 9 lakh taken in the New Year under two new scheme of Pradhan Mantri Awas Yojana will receive interest subvention of 4 per cent and loan of upto Rs 12 lakh will get a 3 per cent interest waiver.