Bank stocks were in the limelight today, surging up to 9 per cent on the government’s decision to put in place a mechanism to effectively deal with the problem of mounting bad loans in the sector.

In this regard, a proposal to amend Section 35 A of the Banking Regulation Act through the ordinance route was approved by the Cabinet yesterday.

Reacting to the development, shares of IOB zoomed 9.12 per cent, Bank of Maharashtra surged 6.2 per cent and Union Bank of India rose 4.7 per cent on the BSE.

Among others, PNB climbed 3.21 per cent, Andhra Bank went up by 2.82 per cent, Bank of Baroda (2.68 per cent) and SBI (2.57 per cent).

The amendment to the Banking Regulation Act will empower the RBI to issue direction to banks to recover non-performing assets (NPAs) from loan defaulters.

After the Cabinet meeting yesterday, Finance Minister Arun Jaitley had said the government took some important decisions in respect to the banking sector.

Public sector banks (PSBs) are saddled with NPAs or bad loans to the tune of a staggering Rs 6 lakh crore.

Bad loans rose over Rs 1 lakh crore in the first nine months of the last fiscal to Rs 6.07 lakh crore by December 31, 2016.

Gross NPAs of PSBs stood at Rs 5.02 lakh crore at the end of March 2016 against Rs 2.67 lakh crore at the end of March 2015.

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