Public sector banks, NBFCs rally on Banking Bill hopes

On a day when the BSE Sensex ended nearly flat, state-run banks staged a rally on hopes that legislation on banking sector reforms would be passed during the current session of parliament. On the other hand, stocks of major non-banking finance companies (NBFCs) also shot up amid expectations that the RBI would be able to give new banking licences if the Banking Laws (Amendment) Bill, 2011 which is currently in the parliament is passed.

Punjab National Bank rose 2.27 per cent to Rs 839.60, Bank of India gained 4.45 per cent to Rs 306.45 while Bank of Baroda ended 4.21 per cent higher at Rs 831 and IDBI Bank by 4.20 at Rs 114.05. Union Bank of India and Oriental Bank of Commerce gained on capital infusion hopes and banking reforms.

Union Bank rose 4.47 per cent, while Oriental Bank added 5.33 per cent at Rs 366.70. Syndicate Bank surged by 4.45 per cent to Rs 136.20 on the BSE.

"The market is now waiting for fresh cues on reforms from the government to revive the investment cycle to boost growth. It remains to be seen whether the banking bill will have a smooth sailing as Opposition is against the Banking Bill," said an analyst .

The parliament is expected to amend the banking laws that includes raising the limit on shareholders' voting rights in public and private sector banks, a step seen largely positive towards the government's reform drive.

If approved, the cap on voting rights for investors in private sector banks such as HDFC Bank and ICICI Bank would rise to 26 per cent from 10 per cent, and to 10 per cent for government banks such as SBI from just 1 per cent now.

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