RBI gift! These 3 banks have made investors rich; shares jump 8% to 10%
RBI has released these three banks, Corporation Bank, DhanLaxmi Bank and Allahabad Bank, from PCA framework. Their share prices instantly rocketted!
While benchmark index Sensex was trading on a cautious note on Wednesday’s trading session, there were three bank stocks that were reliving their glorious days after a long time as investors continued to buy their shares in heavy amounts. These banks are Corporation Bank, DhanLaxmi Bank and Allahabad Bank. This sharp rise in investor sentiment is all courtesy RBI. The central bank has released these three banks from Prompt Corrective Action (PCA) framework. Being under this norm, meant that a bank is deemed not capable enough to carry on their business including basic ones like lending and deposits. Now that, they are out of the framework, it is expected that it will lead to credit boost, stability in earnings and asset quality.
At around 1357 hours, Allahabad Bank was trading at Rs 47.15 per piece up by 7.53% on Sensex. However, the bank has surged by over 8.20% after clocking intraday high of Rs 47.45 per piece.
Meanwhile, Corporation Bank and Dhanlaxmi Bank both have gained over 10% after touching intraday high of Rs 32.15 per piece and Rs 15.4 per piece respectively.
Currently, the share price of Corporation Bank was trading at Rs 31.05 per piece up by 6.34%; whereas Dhanlaxmi shares were performing at Rs 15.20 per piece higher by 8.57%.
RBI in its meeting held on Tuesday, reviewed banks performance under PCA framework. They noted that, government infused fresh capital on February 21, 2019 into various banks including some of the banks currently under the framework.
Under the recapitalization plan, Allahabad Bank and Corporation Bank received funds of Rs 6,896 crore and Rs 9,086 crore respectively.
Thereby, RBI said, “This has shored up their capital funds and also increased their loan loss provision to ensure that the PCA parameters were complied with. The two banks have also made the necessary disclosures to the Stock Exchange that post infusion of capital, the CRAR, CET1, Net NPA and Leverage Ratios are no longer in breach of the PCA thresholds.”
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Further the central bank added, the banks also apprised RBI of the structural and systemic improvements put in place to maintain these numbers.
Hence, Allahabad Bank and Corporation Bank were guided to be taken out of the PCA Framework subject to certain conditions and continuous monitoring.
Apart from this, RBI also decided to take Dhanlaxmi Bank out of the PCA Framework, subject to certain conditions and continuous monitoring, as the bank is found to be not breaching any of the Risk Thresholds of the PCA Framework.
RBI will continue to monitor the performance of these banks under various parameters.