Banking stocks soared against the backdrop of a flattish market on Thursday, with traders responding positively to the RBI’s late Wednesday evening message to banks to go easy with bad loan provisioning. While the benchmark Nifty closed marginally lower, down 0.03 per cent at 7,912.05, the Bank Nifty — the index for both public and private lenders — surged 1.76 per cent to finish the day at 16,637.15.

Relief ahead of results

Bank stocks have been under pressure in the last few months after RBI Governor Raghuram Rajan forced their hands at making provisions for borrowers unable to repay. This exercise of recognising bad loans, which analysts estimated would cost banks about ₹70,000 crore, pushed their stocks out of favour. In Wednesday’s communication to bankers, however, the RBI is believed to have pruned its list by about 20 corporate borrowers from the original 150, giving banks more breathing space ahead of reporting their March quarter results.

The benefits were immediately visible on Thursday, with ICICI Bank gaining a massive 5.42 per cent in a single day’s trade to close at ₹250.95. The worst hit by the bad loan crisis gained the most through Thursday’s trade.

Least affected end lower

These included Punjab National Bank (up 4.69 per cent), Federal Bank (up 4.44 per cent), Canara Bank (up 4.16 per cent) and SBI (up 3.31 per cent). Other gainers were Bank of Baroda (up 2.98 per cent), Bank of India (up 2.27 per cent) and Axis Bank (up 1.47 per cent).

Banks such as Kotak Mahindra Bank, YES Bank and HDFC Bank, which were least affected by the bad loan crisis, however ended weak. IndusInd Bank l ost 1.27 per cent in trade to close at ₹971.35, after it reported weakened asset quality in its March quarter on Thursday.

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