PSU bank stocks surge; gain as much as 6.2%

Bank of Baroda's scrip surged 6.18 per cent, while PNB rallied 4.52% on the BSE

Shares of public sector banks today rose by as much as 6.2 per cent after Finance Minister P Chidambaram reviewed performance of the sector and said they are focusing on recovery.

Bank of Baroda's scrip surged 6.18 per cent, while PNB rallied 4.52 per cent on the BSE.

Similarly, Canara Bank gained 3.97 per cent, while IOB rose by 1.83 per cent, SBI was up 1.54 per cent and Allahabad Bank went up by 1.81 per cent.

"The fact that the Finance Minister is looking to tackle the problem of the increase in bad loans in PSU banks sent a reassurance to the markets, resulting in PSU banks appreciating across the board," said Raghu Kumar, Cofounder RKSV.

Finance Minister P Chidambaram today exhorted the PSU banks to effectively deal with problem of non-performing assets (NPAs), which has become their biggest challenge.

Addressing a press conference after reviewing performance of public sector banks, the Minister clarified the model of conduct will neither effect government functioning nor refrain the RBI from awarding new bank licences.

"The biggest challenge facing the public sector banks is NPAs and asset quality...NPAs are high in large corporate sector as well as in the SSI and MSE sector," he said.

Stressing on the importance of addressing the NPA issue, the Minister further said "we have told them (banks) to focus on recovery and banks are focusing on recovery".