Union Bank, Bank of India, Canara Bank, other PSU bank stocks drop up to 2% on profit booking

PSU Bank stocks

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The shares of PSU banks dropped in red on July 17 as investors may have resorted to profit booking at elevated levels. The sharp fall in the share prices pushed the Nifty PSU Bank index down half a percent to stand in the red.

The PSU Bank index has now snapped a three-day gaining streak, which was buoyed by multiple factors.

Union Bank of India was the top loser on the index, dropping nearly 2 percent to trade at Rs 146 apiece. Bank of India shares followed, falling over 1.5 percent. Canara Bank and Punjab National Bank (PNB) shares dropped over 1 percent each, while Bank of Baroda, Punjab & Sind Bank and Indian Bank shares were down nearly a percent.

UCO Bank shares were meanwhile trading in the red with marginal losses.

Shares of Central Bank of India, Indian Overseas Bank (IOB), State Bank of India (SBI) and Bank of Maharashtra however bucked the trend to trade in the green with marginal gains.

Also read: SBI's Rs 25,000-crore QIP over-subscribed 3x on solid demand led by LIC

The stocks have recently surged after reports suggested that the Centre might look towards a fresh round of reforms for the financial sector. According to CNBC-TV18, sources stated that additional consolidation among public lenders remains a possibility, as the government looks to create larger banking institutions capable of supporting the credit demands of a rapidly expanding economy.

Further, there is also a proposal which is under consideration to raise the current 20 percent limit on foreign ownership in PSU banks. This move will help to draw long-term investors towards the banks, while also broadening the capital base of these lenders.

Additionally, the sources suggested that the Centre may also allow large corporates into the banking space, with the additional of guardrails and strong frameworks, along with RBI's oversight. Some of these safeguards could be adding a limit to corporate shareholding in banks, or making sure that the bank's capital is not use to self-fund the corporate, or allowing large NBFCs to upgrade to commercial banks.

Also read: Our LIVE blog on stock market updates

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