We are in the middle of the year and we are witnessed of the newly democratic country as BJP returned with power for the second term. This year has been full of political events, first the Lok Sabha election, second Interim budget and finally on 5th July 2019 our first female Finance Minister Nirmala Sitharaman has presented the full-year budget of 2019 under PM Modi, which aims to create a virtuous cycle for growth, skills, employment, exports, and capital flows. Reforming the rural economy, financial sector and conditions for ease of living standards and making India the global hub for manufacturing activities.
However, the market seems disappointed after budget at close on Friday; Indian benchmark indices fell sharply for the first time in the last five consecutive sessions. The BSE Sensex fell 394.67 points to 39,513.39; the Nifty50 declined 135.60 points to 11,811.20 and Nifty PSU Banks was marginally up by 6.05 points to 3,303.35.
There were few key measures taken by FM Sitharaman to support the financial sector, especially in PSU Banks. The FM has proposed to inject Rs 70,000 crores for PSU Banks recapitalization to boost the liquidity in the banking system or to improve the credit facility. Banks like Dena Bank, Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce and Bank of Maharashtra are currently under PCA (Prompt Corrective Action) and RBI is closely watching them to improve their corporate loan book.
At Friday close, Central Bank of India, UCO Bank gained while Indian Bank, J&K Bank, Oriental Bank of Commerce were down by 1-2% and Allahabad Bank, IDBI Bank were down more than 5% each.
Observation: Recapitalization in PSU Banks is definitely a positive outlook for the banking system as this will go a long way for lending purpose in the economy and capital growth of the banks.