PSU stocks plummeted on May 6 after RBI proposed stricter rules for government lending to projects under implementation. While the share of Punjab National Bank decreased by 6.41%, the stock prices of Canara Bank, Bank of Baroda (BoB), and Union Bank of India fell by 5.42%, 3.71%, and 3.12%, respectively, in the Bombay Stock Exchange. The stock price of the State Bank of India and Bank of India fell by 2.86% and 2.57%, respectively. Also, Maharatna PSUs Power Finance Corporation & RECL recorded a stock price depletion of 8.93% and 7.35%, respectively.

The RBI, on May 3, had proposed tighter rules to govern lending to projects under implementation. The central bank’s draft rules include a classification of the projects as per their phase and higher provisioning of up to 5% during the construction phase, even if the asset is standard – resulting in a bloodbath in the BSE.

Expert Vinod Nair, Head of Research at Geojit Financial Services, said, “The domestic indices traded in a range-bound manner influenced by PSU banks’ underperformance due to the RBI’s tighter norms on lending to projects under development.”