Bank stocks in demand, surge up to 4%

New Delhi: Bank stocks on Wednesday rose up to 4 percent after the government decided to set up an alternative mechanism to oversee the proposals for consolidation of public sector lenders.

Shares of Punjab National Bank gained 3.26 percent, Indusind Bank rose by 2.21 percent, SBI (1.70 percent), ICICI Bank (1.67 percent), HDFC Bank (1.29 percent), Federal Bank (1.19 percent) and Kotak Mahindra Bank (1.08 percent) on BSE.

Bank of Baroda advanced by 1.08 percent, AXIS Bank (0.77 percent) and Yes Bank (0.52 percent).

The BSE bank index also went up by 1.39 percent to end at 27,455.08.

Among others, Allahabad Bank surged 4.21 percent and Bank of India rose by 3.12 percent.

"Banking stocks grabbed investor's attention on account of cabinet nod to oversee PSU banks consolidation," said Vinod Nair, Head of Research, Geojit Financial Services Ltd.

The government today decided to set up an alternative mechanism to oversee the proposals for consolidation of public sector banks (PSBs) with a view to creating fewer but stronger lenders.

The alternative mechanism will be decided by Prime Minister Narendra Modi, Finance Minister Arun Jaitley said after the Union Cabinet meeting.

The government aims to create strong and competitive banks in public sector space to meet the credit needs of the growing economy, absorb shocks and have the capacity to raise resources without depending on the state exchequer, he said.