The Telegraph
Thursday , May 15 , 2014
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Bank stocks cheer report

Mumbai, May 14: Shares of public sector banks today surged between 3 per cent and 10 per cent as investors gave a thumbs-up to an RBI report which suggested that the government should reduce its holdings in lenders to below 50 per cent.

Vijaya Bank gained nearly 3.71 per cent to Rs 43.35 on the Bombay Stock Exchange, while the United Bank of India scrip rose over 4 per cent to Rs 36.35. Uco Bank ended with gains of almost 6 per cent at Rs 92.15.

The Canara Bank scrip surged almost 11 per cent to Rs 333.80. Bank of Baroda shares rose over 9 per cent to Rs 958.85. Shares of the State Bank also ended in the green.

Analysts believe it may be difficult to implement all the recommendations made by the P.J. Nayak committee on the governance of bank boards yesterday. However, some of them can be broadly acceptable to stakeholders such as employee unions and can be implemented by the new government.

The RBI panel had suggested that the government cut its holding in public sector banks to below 50 per cent, as it was critical to the way the lenders were being governed. It had pointed out that the governance at the 26 public sector banks (PSBs) suffered because of several “externally imposed constraints” such as dual regulation by the Reserve Bank of India and the finance ministry and external vigilance by agencies such as the CVC and the CAG.

“If the government stake in these banks were to reduce to less than 50 per cent, together with certain other executive measures, all these external constraints would disappear,” it said.

Buying in these stocks came on a day investors turned cautious, resulting in the benchmark index witnessing a drop of 56 points to end at 23815.12.