Banking stocks continued to trade under pressure for the second straight day after rating agency Fitch said that the progressive increase in minimum capital requirements under Basel III is likely to put nearly half of Indian banks in danger of breaching capital triggers. Weak global sentiments further dented market sentiments on Monday as markets are expecting that the US Federal Reserve could be closer to an interest rate hike.
At 1.05 pm, the Nifty Bank index was trading 2.14 per cent, or 433.65 points down at 19811.65. Shares of Bank of Baroda were trading 5.15 per cent down at Rs 163.10. Other banking majors such as YES Bank, Punjab National Bank, Bank of India, State Bank of India and Canara Bank were down by 4.98 per cent, 4.14 per cent, 4.05 per cent, 3.46 per cent and 3.17 per cent, respectively.
Axis Bank was trading 2.73 per cent down at Rs 596.35. Shares of the lender also came under pressure on Monday after Goldman Sachs removed it from ‘Asia Pacific Buy List’ and downgraded the lender to “neutral” citing recent rally in shares.
The rating agency estimated that Indian banks will require around $90 billion in new capital by the end of the financial year 2019 to meet Basel III standards. The state banks account for about 80 per cent of the total.
According to Fitch Rating, state-run banks are the most at risk, given their poor existing capital buffers and weak prospects for raising capital through market channels. The minimum total CAR is a prerequisite for payment of coupons on both legacy and Basel III perpetual debt capital instruments.