Union Bank of India (down 4.59%), Punjab National Bank (down 3.04%), Yes Bank (down 2.77%), Axis Bank (down 1.90%), Canara Bank (down 1.83%), ICICI Bank (down 1.01%), Bank of Baroda (down 0.93%), Kotak Mahindra Bank (down 0.86%), Bank of India (down 0.77%), Federal Bank (down 0.77%), HDFC Bank (down 0.54%), State Bank of India (down 0.37%) and IndusInd Bank (down 0.02%), edged lower.
The BSE Bankex was down 1% at 9,756.25. It underperformed the Sensex, which was down 0.15% at 15,846.67.
The BSE Bankex had underperformed the market over the past one month until 12 December 2011, sliding 7.79% compared with the Sensex's 7.69% decline. The index had also underperformed the market in past one quarter, sliding 8.38% as against 3.83% fall in the Sensex.
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According to the report, in the eastern region, five infrastructure projects, with a total investment of Rs 16686 crore, are awaiting various approvals.
The banking sector, in general, and public sector banks, in particular, have reportedly sanctioned a significant amount of loans for large projects. In a number of projects, implementation is held up because of pending approvals at the central/state levels, banks reportedly said in communication to state governments in the eastern region. Lending by banks to infrastructure projects, including telecom, power and roads, increased 21.7% to Rs 574569 crore in October 2011, compared with Rs 472142 crore in October 2010, report suggested.
On Saturday (10 December 2011), finance minister Pranab Mukherjee reportedly held discussions with chief ministers of eastern states in Kolkata on credit flow to farming, small and micro units and infrastructure projects. The finance ministry had, in October and November 2011, held several meetings with the ministries concerned on the status of pending approvals in a bid to expedite the process.
The delay in approvals often means cost and time overruns and endangers the viability of a project. The risk of the loans sanctioned/disbursed by banks turning into non-performing assets is also significantly enhanced, the finance ministry is reported to have said. The secretary (financial services) in the ministry had recently written to the chief secretaries of various state governments for expediting approvals.
Report suggested that the RBI, too, is concerned, with commercial banks increasing exposure to infrastructure projects. In its trends and progress report 2010-11, it said risks were emerging from the concentrated and high pace of lending to the infrastructure sector by public sector banks. Such exposure raises apprehension of increasing delinquencies in the future, it had said.
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