Shares of public sector banks continued to rally for the fourth session on September 18, driving the Nifty PSU Bank index up 4 percent in the 10th session in the last 12 days.
Strong credit growth, relatively lower valuations, and commendable work on the asset quality front helped the surge in the banking index.
As of 2.30pm, the Nifty PSU Bank traded up 4 percent led by 20 percent gain in Indian Overseas Bank. Punjab & Sind Bank, UCO Bank and Central Bank of India were other gainers that surged 13-16 percent.
Axis Securities in a recent note underlined that credit growth of scheduled commercial banks (SCBs) surged 15 percent as of March 2023 from 8.6 percent a year back. The faster pace of credit offtake is attributed to the pent-up demand factor as the normalisation of economic activity gained pace.
Also read: What is driving investor interest in public sector banks?
“The RBI’s December 2022 Financial Stability Report highlighted that Indian banks are well-capitalised and are in a well-equipped position to absorb any macroeconomic shocks. Under the baseline scenario, the GNPA ratio of SCBs is likely to improve to 4.9 percent in September 2023 from 5 percent in September 2022. Even the slippage ratio which has been on the uptrend since December 2021 has cooled off in Q2FY23. PSBs have registered the most improvement during this period,” the broker said.
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