Bhushan Steel resolution effect: PSBs gain, Nifty PSU Bank index up 2%

SBI, Bank of India, PNB, Oriental Bank of Commerce, Canara Bank, Indian Bank and Bank of India were up 1% to 4% on the NSE.

Shares of public sector banks (PSBs) were trading higher by up to 4% on the National Stock Exchange (NSE) in early morning trade on Monday after Tata Group acquired controlling stake of 72.65% in the debt-ridden Bhushan Steel for around Rs 352 billion last week, which will help in cleansing the banking system as well as boost lenders profitability.

This is the second resolution from the first list of 12 major accounts identified by the Reserve Bank of India (RBI). The first one was Vedanta buying Electrosteel last month.

State Bank of India (SBI), Bank of India, Punjab National Bank (PNB), Oriental Bank of Commerce, Canara Bank, Indian Bank, Union Bank of India, Bank of Baroda and Sydicate Bank were up in the range of 1% to 4% on the NSE.

At 09:17 am; the Nifty PSU Bank index, the largest gainer among sectoral indices, up 1.7%, as compared to 0.17% decline in the Nifty 50 index. Nifty Bank and Nifty Private Bank index were up 0.23% and 0.08%, respectively.

In past five trading days, Nifty PSU Bank index had tanked 7% against 2% decline in the benchmark index till Friday. In past three month PSU bank index plunged 17% as compared to 1.4% rise in the Nifty 50 index.

Tata Steel on Friday said its wholly-owned subsidiary BNPL had completed the acquisition of a controlling stake of 72.65% in Bhushan Steel, making it the first of the 12 RBI-recommended NPA cases to be resolved under the Insolvency and Bankruptcy Code (IBC).

According to Business Standard report, PNB, which saw the highest net loss by any bank in a quarter at Rs 134 billion during January-March, believes the insolvency resolution at Bhushan Steel will have a positive impact on profits to the tune of Rs 7.35 billion in the June quarter. PNB had the second-highest exposure among the lenders to Bhushan. CLICK HERE TO READ FULL REPORT

Bhushan Steel locked in upper circuit of 5% at Rs 29, while Tata Steel was trading 1% higher at Rs 597 on the BSE.