Bank of Baroda (down 6.24%), Bank of India (down 5.62%), Union Bank of India (down 5.19%), Punjab National Bank (down 4.45%), Canara Bank (down 4.05%), IDBI Bank (down 3.81%), State Bank of India (down 3.35%), IndusInd Bank (down 2.16%), Federal Bank (down 2.11%), Kotak Mahindra Bank (down 1.97%), Yes Bank (down 1.74%), ICICI Bank (down 1.64%), Axis Bank (down 1.56%) and HDFC Bank (down 1.32%), edged lower.
The BSE Bankex was down 2.04% at 13,008.02. It underperformed the BSE Sensex, which was down 1.20% at 19,230.77.
The BSE Bankex had underperformed the market over the past one month till 2 July 2013, sliding 6.89% compared with the Sensex's 1.50% fall. The index had also underperformed the market in past one quarter, rising 0.34% as against Sensex's 2.22% rise.
The Reserve Bank of India (RBI) issued draft guidelines for banks to hike their capital and provisioning requirements for exposures to corporates having unhedged foreign currency exposure.
Unhedged foreign currency exposures of the corporate are an area of concern not only for individual corporates but also to the entire financial system, RBI said in its draft guidelines issued on Tuesday, 2 June 2013.
Corporates who do not hedge their foreign currency exposures can incur significant losses due to exchange rate movements. These losses may reduce their capacity to service the loans taken from the banking system and thereby affect the health of the banking system, it added.
RBI said that it had issued various guidelines advising banks to closely monitor the unhedged foreign currency exposures of their corporate clients and also factor this risk into the pricing. However, the extent of unhedged foreign currency exposures of the corporate continues to be significant and increases the probability of default in an environment of high currency volatility. RBI, therefore, decided to introduce incremental provisioning and capital requirements for bank exposures to corporates having unhedged foreign currency exposures.
Starting 1 October 2013, banks will have to monitor unhedged foreign currency exposure of borrowers at monthly intervals.
As per the new guidelines, for likely loss of 15-30%, the incremental provisioning over and above the existing standard provisioning will be 20 basis points (bps); for loss of 30-50%, it will be 40 bps; for loss of 50-75%, the provisioning will be 60 bps and above 75%, it will be 80 bps.
There is no provisioning for loss up to 15%. Besides, for a loss of 75% and above, there is a 25% increase in risk weight, the RBI said in its draft guidelines.
The draft guidelines advised banks to ensure that their policies and procedures for management of credit risk factor their exposure to currency-induced credit risks and are calibrated towards borrowers whose capacity to repay is sensitive to changes in the exchange rate and other market variables.
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