Mumbai, July 5: Stocks went into a tailspin today as markets fretted about new restrictive rules on bank ownership amid the lull in fresh buying ahead of the budget. The BSE sensex closed 26.81 points lower at 4843.77, hemmed in by investors who dumped shares of private-sector banks — the group socked by the fresh curbs.

The Reserve Bank last week capped at 10 per cent, the stake an industrial group could hold in private banks. The excess shares must be sold off to bring the stake within new limits. The trouble is that banks must find those who will buy shares — offloaded by existing owners in the secondary market —merely as investments.

Analysts say private banks have bright growth prospects, especially in retail credit, but voice concerns the new norms could make it difficult for them to find strategic investors keen on just a sliver of equity.

Global Trust Bank, which is on the lookout for a strategic partner to bring in additional capital, was bruised all over — its share closing at Rs 11.88, a whopping 13 per cent slide from its previous finish of Rs 12.89.

IndusInd Bank shed over 7 per cent at Rs 46.60 from Friday’s Rs 50.25. Some of the other prominent losers included Federal Bank, which lost close to 2.61 per cent compared with its previous finish, and ICICI Bank, which ended with a loss of 3.85 per cent at Rs 235.40. ING Vysya closed at Rs 377.35, down 5.18 per cent from its last finish of Rs 398; it had opened weak at Rs 322.

The Reserve Bank released draft recommendations related to ownership and governance in domestic private sector banks. “It suggested that in the interest of diversified ownership, no single entity or group of related entities share holding or control, directly or indirectly, in any bank, in excess of 10 per cent of paid-up capital.” It said.

The RBI also suggested that private banks’ stake in peers be capped at 5 per cent of its paid-up capital. Similarly, a foreign bank in India will be allowed to hold shares in any other private bank only up to 5 per cent.

Promoters of private sector banks such as HDFC Bank, IDBI Bank, UTI Bank and Vysya Bank will have to prune their stakes. Even ICICI Bank will have to dilute its current holding in Federal Bank from 20 per cent, as will HSBC, which has more than 14 per cent in UTI Bank. The draft has sparked fears that foreign banks will fight shy of picking up stake in private banks. If implemented, the norms could make it more difficult for banks such as Global Trust Bank to get a strategic investor.

While analysts are taking comfort in the fact that RBI’s draft is not the final charter, with scope for dilution, others feel it would force smaller private banks to reconsider mergers to meet the stipulated minimum net worth of Rs 300 crore.