Shares of sixteen PSU banks fell 1.77% to 7.6% at 13:54 IST on BSE, on concerns of bad loans after the Supreme Court announced its final verdict on coal blocks on Wednesday, 24 September 2014.
Union Bank of India (down 5.58%), Punjab National Bank (down 3.69%), Allahabad Bank (down 7.6%), State Bank of India (SBI) (down 2.71%), Oriental Bank of Commerce (down 5.29%), Bank of Baroda (down 2.02%), Bank of India (down 4.4%), Canara Bank (down 2.36%), Syndicate Bank (down 5.41%), Indian Overseas Bank (down 4.65%), IDBI Bank (down 7.48%), UCO Bank (down 3.29%), Andhra Bank (down 7.44%), Dena Bank (down 1.77%), Vijaya Bank (down 1.81%) and Corporation Bank (down 2.28%) edged lower.
Meanwhile, the S&P BSE Sensex was down 149.89 points or 0.56% at 26,594.80.
Shares of PSU banks declined on concerns of bad loans due to their high exposure to power and metal sector. The Supreme Court in its final verdict announced on Wednesday, 24 September 2014, scrapped 214 out of 218 coal blocks allocated between 1993 and 2010 it had already declared illegal due to irregularities in the allocation of the blocks. The four coal blocks which are exempt from the verdict are run by the Central government with no joint venture with the private sector.
A report indicated that banks' exposure to iron and steel companies stands at Rs 2.65 lakh crore, until June 2014. The sector's exposure to power companies stands at Rs 5 lakh crore.
A foreign brokerage firm in its research report said that State Bank of India and Power Finance Corporation have an exposure of some $10-$12 billion to the coal, power and steel sectors.
A domestic brokerage firm in its research report said that the Supreme Court order will hit Andhra Bank the hardest, as the power sector accounts for 13.4% of its total industry loan book, followed by UCO Bank (13.1%), Canara Bank's (12.6%) and Corporation Bank (11.9%).
Also the fate of money invested by companies in coal production is uncertain. About Rs 3 lakh crore has already gone as investments to develop the coal blocks, reports indicated.
A bench headed by Chief Justice R M Lodha last month had held that all coal blocks allocations since 1993 by various regimes at the Centre have been made illegally and arbitrarily. However, it had stopped short of cancelling them saying, what the consequences will be is the issue which remains to be tackled.
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