PSU bank stocks fall on RBI's draft on tighter norms for infra project financing

Share of PSU banks took a dive in trade on May 6, after the Reserve Bank of India (RBI) released a draft proposing tighter norms for lending and heightened monitoring for under-construction infrastructure projects.

On May 3, the RBI proposed that lenders should set aside higher provisions for all infrastructure projects that are under-construction, and also asked the lenders to ensure strict monitoring of any emerging stress.

At 11.45 am, the Nifty PSU Bank index plunged around 3.2 percent. 

The top laggards on the index were Punjab National Bank, Canara Bank, Bank of Baroda and Union Bank, all slumping over four percent.

NBFCs such as REC, Power Finance and IREDA also crashed up to 12 percent as they are they focus on financing power projects, which are a significant part of the infrastructure pie.

Public-sector lenders are disproportionally impacted since public banks have a higher exposure to infrastructure loans.

Currently, India is seeing a boom in infrastructure and manufacturing projects, led by the central government's drive to boost the economy.