Bank stocks surge up to 9% on NPA resolution push

New Delhi: Bank stocks were in the limelight today, surging by up to 9 percent on the government's decision to put in place a mechanism to effectively deal with the problem of mounting bad loans in the sector.

In this regard, a proposal to amend Section 35 A of the Banking Regulation Act through the ordinance route was approved by the Cabinet yesterday.

Reacting to the development, shares of IOB zoomed 9.12 percent, Bank of Maharashtra surged 6.2 percent and Union Bank of India rose by 4.7 percent on BSE.

Among others, PNB climbed 3.21 percent, Andhra Bank went up by 2.82 percent, Bank of Baroda (2.68 percent) and SBI (2.57 percent).

The amendment to the Banking Regulation Act will empower the RBI to issue direction to banks to recover non-performing assets (NPAs) from loan defaulters.

After the Cabinet meeting yesterday, Finance Minister Arun Jaitley said the government took some important decisions in respect of the banking sector.

Public sector banks (PSBs) are saddled with NPAs or bad loans to the tune of a staggering Rs 6 lakh crore.

Bad loans rose by over Rs 1 lakh crore in the first nine months of the last fiscal to Rs 6.07 lakh crore by December 31, 2016.

Gross NPAs of PSBs stood at Rs 5.02 lakh crore at the end of March 2016, up from Rs 2.67 lakh crore at the end of March 2015.