Following RBI's notification of Basel-3 norms, marketmen shorted banking stocks on Thursday.
The Bank Nifty fell 1.75 per cent, the CNX PSU Bank index lost 2.6 per cent and the BSE Bankex shed 1.74 per cent.
“There is expectation of erosion in shareholder returns by 200 to 300 basis points,” said Mr Dinesh Shukla, Banking Analyst, Sharekhan.
“However, net interest margins are expected to improve by 20-25 basis points though it will take some time,” he added.
Experts said shareholders are never happy with companies having idle cash on their balance sheet.
“A lot of banks will be tempted to fund high yielding assets just to maintain their return of equity (ROE) or show a lower hit on ROE,” said Mr Kunal Sabnis, Banking Analyst, JHP Securities.
“This will change the mix with which banks fund loans to its borrowers.”