PSU bank stocks Corporation Bank, Allahabad Bank jump after coming out of RBI’s PCA framework

Private sector Dhanlaxmi Bank shares rose 10% to Rs 15.40 on BSE.

Shares of state-run Corporation Bank, Allahabad Bank and Dhanlaxmi Bank jumped on Wednesday morning, after the PSU banks moved out out of RBI’s prompt corrective action (PCA) framework. Corporation Bank shares zoomed more than 10% to hit intra-day high of Rs 32.15 on BSE, while Allahabad Bank shares climbed 8.20% to hit the day’s high of Rs 47.45 on BSE. Private sector Dhanlaxmi Bank shares rose 10% to Rs 15.40 on BSE.

Notably, the Reserve Bank of India (RBI) on Tuesday took Allahabad Bank, Corporation Bank and Dhanlaxmi Bank out of the prompt corrective action (PCA) framework, following an improvement in the two public-sector banks’ (PSBs) financial ratios after a fresh round of capital infusion in them.

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Earlier last week, the ministry of finance had announced an infusion of Rs 9,086 crore in Corporation Bank and Rs 6,896 crore in Allahabad Bank. The two banks were the largest beneficiaries in the latest round of recapitalisation which involved fresh infusion into a total of 12 PSBs.

The RBI yesterday noted that the Board for Financial Supervision (BFS) reviewed the performance of banks under PCA. The latest capital infusion, has shored up their capital funds and also increased their loan loss provision to ensure that the PCA parameters were complied with. “Accordingly, based on the principles adopted by the BFS in its earlier meeting dated January 31, 2019, it was decided in the meeting held on February 26, 2019 that Allahabad Bank and Corporation Bank be taken out of the PCA Framework subject to certain conditions and continuous monitoring,” RBI said.