Banking stocks fell on Wednesday after the RBI banned credit guarantees. On Tuesday, the RBI barred all banks from issuing letters of undertaking. Overall trade credit business contributed 3-4 per cent for public banks, which should be at risk, according to Kotak Securities.

A key worry would be to see the impact of the current guideline on interest rates and possible risk of higher delinquency for a small segment of customers, Kotak Securities added.

Meanwhile, PNB told police on Tuesday that it had uncovered additional exposure of about Rs 942 crore to the Gitanjali group, taking its overall exposure in connection with the fraud to well over the $2 billion mark.

PNB shares fell as much as 4.8 per cent in early trade to Rs 93.30, posting its biggest intra-day percentage loss in two weeks. The stock is down 42.9 per cent this year as of Tuesday's close.

At about 11.30 am, the stock was quoting at Rs 94.65, down 3.42 per cent or Rs 3.35 on the BSE.

Canara Bank shares too dropped as much as 4.2 per cent to Rs 241.35 in morning deals. At about 11.30 am, the stock was quoting at Rs 247.70, down 1.76 per cent.

The Nifty PSU Bank index fell as much as 2.2 per cent. At about 11.30 am, the index was down 1.14 per cent or 33.15 points at 2,877.70.

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