Capital infusion, bad bank announcement boost banking stocks

Mumbai, Feb 5 : The government’s recapitalisation support of Rs 20,000 crore to state-run banks, announced in the budget along with the decision to form a bad bank, have been a major support for the investors having put their money in the banking shares.
A recent report by Moody’s Investors Service said that the proposed asset reconstruction company (ARC), described as a bad bank in common parlance, will resolve legacy problem loans and will be credit positive for banking system.
The allocation of a modest Rs 20,000 crore capital infusion for public sector banks will help the banks to meet Basel capital requirements, but will not boost credit growth, it added.
“We expect that the government will continue to support public sector banks’ capital needs as it has done over the past few years,” it said.
The BSE Banking index has surged 16 per cent in this week since the Union Budget for FY22 was presented on Monday.
On Friday, the index rose 360.63 points, or 0.90 per cent, to close at 40,301.81 points.