PSU Banks see a sharp recovery from intraday lows — Here’s what triggered it

The Nifty PSU Bank index has seen a recovery of 1.3% from the lows of the day after CNBC-TV18 reported citing sources that the government may consider a fresh round of reforms in the financial sector.Following this newsbreak, all stocks in the PSU Bank index are trading with gains of up to 2%.

Sources told CNBC-TV18 that further consolidation in the state-run lenders is not ruled out, as India is aiming to build bigger banks that are capable of meeting the credit needs of a fast growing economy.

The government could also consider raising the 20% cap on foreign investments in public sector banks, in a move aimed at attracting long-term capital and deepening the investor base in these institutions.At the end of the June quarter, four state-run lenders, UCO Bank, Indian Overseas Bank, Punjab & Sind Bank and Central Bank of India have government stake which is in excess of 90%.

The government had earlier embarked on a mega PSU Bank merger exercise in 2019, where 10 state-run lenders were merged into four entities.

Shares of PNB are the top gainers on the PSU Bank index, with gains of 1.7%, following UCO Bank, Indian Bank, and SBI, which are trading with gains of up to 1.5%.