With the panic over the crisis at the Punjab and Maharashtra Cooperative Bank threatening to snowball, the Reserve Bank of India on Tuesday stepped in to assure depositors.
The central bank issued a statement that the Indian banking system was ‘safe and stable’.
As bank stocks plunge, RBI says system stable
Shares of commercial banks took a beating on Tuesday as a crisis of confidence gripped the banking sector. Private sector lender Yes Bank’s shares tanked 22.8% on Tuesday, after declining 15% on Monday. It closed the day at ₹32.00.
Another private lender RBL Bank’s shares fell 8.7% on Tuesday, while IndusInd Bank stock went down by 6.3%. Troubled mortgage financier Dewan Housing Finance’s stock declined 20%.
Private banks’ shares also took a beating due to concerns over exposure to the non-banking financial sector. The Sensex closed 361.92 points, or 0.94% lower, to close at 38,305.41 points.
Amid the falling banking stocks and social media rumours about the health of the Indian banking system following the crisis at the Punjab and Maharashtra Cooperative Bank, the Reserve Bank of India issued a statement asking people not to pay heed to such speculation.
‘Banking system safe’
“There are rumours in some locations about certain banks, including cooperative banks, resulting in anxiety among depositors. RBI would like to assure the public that Indian banking system is safe and stable and there is no need to panic on the basis of such rumours,” the banking regulator tweeted.
Harm of reputation
Loans by PMC Bank to the now bankrupt real estate developer HDIL had turned sour many years ago, but the lender had not classified those loans as ‘non-performing’, fearing harm of reputation, the former MD of PMC Bank Joy Thomas admitted in a letter to the RBI.
Last week, the regulator imposed restrictions, including a cap on withdrawals from the multi-State cooperative bank due to financial irregularities.