RBI cheers public sector banks; shares rally 12%

The shares of state-run banks on Wednesday soared by up to 12% after the Reserve Bank of India (RBI) announced amendments to recognise more balance sheet items as common equity tier-I capital which will help unlock up to Rs 35,000 crore for these lenders impacted by asset quality troubles.

Indian Bank jumped 12.27%, Bank of Baroda zoomed 11.71% and SBI surged 10.17% on the BSE.

The State Bank of India (SBI) was also the top gainer among 30-Sensex blue-chips on the stock exchange.

Among others, the shares of Bank of India climbed 9.74%, Canara Bank rose by 8.25% and Punjab National Bank went up by 7.73%.

"The RBI has made some amendments to the treatment of certain balance sheet items for the purposes of determining banks' regulatory capital. The review was carried out with a view to further aligning the definition of regulatory capital with the internationally adopted Basel III capital standards," it had said in a press release on Tuesday.

The changes introduced on Tuesday include recognition of revaluation reserves arising from a change in the carrying amount of a bank's property consequent upon its re-valuation as common equity tier-I capital instead of the earlier tier-II capital, it said, adding that these would continue to be reckoned at a discount of 55%.

The amendments came after a lower-than-expected provision for bank recapitalisation in the Budget 2016 at Rs 25,000 crore.