During the financial year 1998-99, the listed banking scrips remained depressed with substantial declines in the banking shares of both public and private-sector banks, affecting market capitalisation and market turnover of the scrips."The bank stocks needed a fillip in view of their need to raise capital from the primary market. The secondary market has to provide more varying investors' perception, liquidity and depth for the bank scrips," the apex bank said in its report on `Trend and Progress of Banking In India for 1998-99'.

The RBI has for the first time included stock market behaviour of bank scrips in its annual review of the banking sector. "Despite the various reforms being carried out in Indian stock exchanges, many bank scrips remain illiquid and thinly traded. In fact, out of 25 banks traded on the National Stock Exchange (NSE), the share of the top five banks in turnover and capitalisation constituted 96.4 per cent and 82.82 per cent respectively during 1998-99," RBI said.

"The market cap of all trade bank scrips on the NSE was Rs 19,561 crore in 1998-99 compared with Rs 28,332 crore in 1997-98," RBI said. On March 31, 1999, shares of eight public sector banks (PSBs) and that of 17 private sector banks were listed on the NSE. PSB scrips that declined significantly were those of Bank of Baroda (54.5 per cent), the State Bank of Travancore (54.4 per cent), Bank of India (52.4 per cent) and the State Bank of India (23.6 per cent).

Meanwhile, the share price of HDFC Bank Ltd, a private-sector bank, showed a decline of a mere 1.1 per cent during the year 1998-99. "Private sector bank stocks whose market performance was affected included Bank of Rajasthan, Federal Bank and HDFC Bank," the apex bank report said, and attributed the battering the scrips got in the secondary market to their poor performance in general and the concern of the market over their NPAs.