PSU banks in focus on RBI panel recommendation

The shares of public sector undertakings (PSU) banks are trading higher by up to 3% in an otherwise subdued market after a committee appointed by the Reserve Bank of India (RBI) made some radical suggestions regarding the government’s control over nationalised banks.

Bank of India, Punjab National Bank, Canara Bank, Union Bank of India, Andhra Bank and Allahabad Bank are up 2-3% each, while State Bank of India, Bank of Baroda, IDBI, Indian Overseas Bank and Oriental Bank of Commerce are up 1% each on the National Stock Exchange (NSE).

The NSE PSU banking share index CNX PSU Bank is up nearly 2% compared to a 0.39% rise in benchmark CNX Nifty at 0950 hours. The Bank Nifty, a gauge for banking shares, however, is up less than 1%.

The RBI proposed that the government should cut its stakes in state banks to below 50% and establish "fully empowered" bank boards.

The panel has also recommended that government investment in PSU banks be transferred to a bank investment company.

The committee, headed by former chairman and chief executive of Axis Bank P.J. Nayak, further suggested that the PSU banks should be brought under the ambit of the companies act.