Bank of India, OBC, Bank of Maharashtra rally 4-14% after RBI lifts lending curbs

All three banks in total have Rs 8,59,620 crore deposits as of December 31, 2018 of which CASA ratio is 35 percent.

Bank Of India and Oriental Bank of Commerce rallied 4 percent each, and Bank of Maharashtra gained 14 percent in morning on Friday after the Reserve Bank of India removed these state-owned banks from its weak-bank watch list, a move that will lift lending restrictions on them.

Bank Of India was quoting at Rs 105.45, up 2.73 percent; Bank of Maharashtra up 7.1 percent at Rs 15.84 and Oriental Bank of Commerce rose 2.45 percent at Rs 98.10 on the BSE, at 09:17 hours IST.

"It has been decided that Bank of India (BoI) and Bank of Maharashtra (BoM) which meet the regulatory norms including Capital Conservation Buffer (CCB) and have net NPAs (non-performing assets) of less than 6 percent as per third quarter results, are taken out of the PCA (prompt corrective action) framework subject to certain conditions and continuous monitoring," the RBI said in a statement.

In case of Oriental Bank of Commerce, the net NPA has come down to less than 6 percent as the government has infused sufficient capital, it said.

Hence, it has been decided to remove the restrictions placed on Oriental Bank of Commerce (OBC) under PCA framework, subject to certain conditions and close monitoring, the apex bank added.

"This is big positive for these PSU Banks and lending sector as under PCA Framework they were not allowed to perform lending activities," Sameer Kalra - Market Research Analyst & Founder at of Target Investing told.

All three banks in total have Rs 8,59,620 crore deposits as of December 31, 2018 of which CASA ratio is 35 percent. Total advances of these banks are at Rs 6,16,339 crore of which retail is 16 percent, MSME is 15.7 percent and Agri is 13.7 percent, which has been stable or lower as lending activities was paused.

"But if there is even 10 percent growth in advance in Q4FY19 by these banks that would amount to Rs 61,000 crore that is a good boost to financial system," said Kalra which has buy rating on Oriental Bank of Commerce & Bank of India.

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