Union Budget: Bank stocks zoom as Govt to set up asset reconstruction company, AMC to manage NPAs

NEW DELHI: Bank stocks on Monday were in the limelight, rising up to 15 per cent following a host of announcements in the Budget for the secor such as the proposed setting up of an

asset reconstruction company

and an

asset management company

(AMC) to clean up non-performing assets.

Shares of Indusind Bank zoomed 14.75 per cent, ICICI Bank gained 12.47 per cent, State Bank of India jumped 10.30 per cent, Axis Bank 7.05 per cent, Federal Bank 6.63 per cent, HDFC Bank 6.21 per cent,

Kotak Mahindra Bank

5.13 per cent, Bandhan Bank 4.48 per cent on the BSE.

Among others, Bank of Baroda rallied 8.60 per cent, Bank of India 7.44 per cent and Punjab National Bank 6.89 per cent.

Finance Minister Nirmala Sitharaman on Monday proposed setting up of an asset reconstruction company and an asset management company (AMC) to clean up non-performing assets in the banking sector.

The new entities will help effectively deal with non-performing assets (NPAs) which may see a surge once regulatory forbearance to deal with the impact of COVID-19 is withdrawn.

The high level of provisioning by public sector banks for their stressed assets calls for measures to clean up the bank books, the finance minister said while unveiling the Budget for 2021-22.

"An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt and then manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realization," she said.

According to Gurpreet Sidana, Chief Operating Officer, Religare Broking Ltd, ".. the announcement to set up an asset reconstruction company and asset management company for resolving stressed assets problem of PSBs is a step is in right direction."

"Overall, the budget is growth-oriented and execution of the announced reforms including the robust divestment/asset monetisation roadmap will be the key," said Vishal Kampani – Managing Director , JM Financial Group on Budget 2021.

The government will 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.

"To further consolidate the financial capacity of PSBs, further recapitalization of Rs 20,000 crores is proposed in 2021-22," she said while presenting the Budget 2021-22 in the Lok Sabha.

Anand Rathi, Chairman, Anand Rathi Financial Services Ltd said, "Additionally various measures have been take to rejuvenate the Indian financial sector including addressing issues such as non-performing and doubtful loans, improving source of longer term funding for infrastructure projects, and capitalization of public sector banks."