Banking Shares Fall After Government's Loan Guarantee Scheme Announcement

Banking shares came under heavy selling pressure in trade on Tuesday a day after the government announced Rs 1.1 lakh crore loan guarantee scheme for the Covid-affected and an additional Rs 1.5 lakh crore under the Emergency Credit Line Guarantee Scheme (ECLGS) that was launched as part of Atmanirbhar Bharat package last year.  The gauge of 12 banking stocks on the National Stock Exchange - Nifty Bank index - was top sectoral loser. The measure fell as much as 445 points or over 1 per cent to fall below its important psychological level of 35,000. 

All 12 banking stocks barring, AU Small Finance, were trading lower in the range of 0.1-3.3 per cent.  The gauge of state-run lenders - Nifty PSU Bank index dropped 1.44 per cent with all the state-run lenders trading lower. 

Among the individual banking shares, Indian Bank was top loser in the basket of PSU Bank shares. Indian bank fell nearly 6 per cent to Rs 145. 

Indian Overseas Bank, J&K Bank, Punjab National Bank, Punjab and Sind Bank, UCO Bank, Central Bank of India and Bank of India also fell between 1-2.5 per cent. 

Out of the loan guarantee scheme of Rs 1.1 lakh crore, the health sector will get Rs 50,000 crore to scale up medical infra, specially targeting under-served areas, in light of the health crisis of the century. The interest rate has been capped at 7.95 per cent. Other sectors will receive Rs 60,000 crore at a maximum interest rate of 8.25 per cent annually. 

Among other measures, Ms Sitharaman announced widening of the Emergency Credit Line Guarantee Scheme under which collateral-free loans are given to MSMEs or or Micro Small and Medium Enterprises. A new scheme will give up to Rs 1.25 lakh loan to 25 lakh small borrowers at lower interest rates. 

As of 2:53 pm, Nifty Bank index was down over 1 per cent trading below its important level of 35,000.