New PSL norms may not be an immediate game changer for banking sector

Given the systemic risk aversion, credit growth may take a few quarters to revive on the back of these norms

Friday saw the Nifty Bank index slide 2.2 per cent, despite the Reserve Bank of India (RBI)’s move to broad-base the canvas under priority sector lending (PSL).

Investors usually welcome the opening up of new growth avenues in the banking sector. However, this has been a deviation from the norm.

While the overall gloomy market conditions may have caused the index to brush aside the announcement, the larger question remains as to whether this is enough for banks to shed their risk aversion as far as lending operations are concerned.

Siddharth Purohit of SMC Capital doesn’t feel so. At the current juncture,