PSU stocks took a nosedive today, with some experiencing declines of up to 13%, following the Reserve Bank of India’s (RBI) proposal to implement stricter regulations on projects under implementation. The new guidelines require a 5% general provision to be set aside for all existing and new project loans in the construction phase. Once projects enter the operational phase, these provisions can be reduced to 2.5% of the funding outstanding and further to 1% under specific conditions. This announcement sent shockwaves through the PSU sector, leading to a sell-off in shares of companies such as Power Finance Corporation (PFC), Rural Electrification Corporation (REC), and Indian Renewable Energy Development Agency Limited (IREDA). PFC and REC saw declines of 13% and 13.6%, respectively, while IREDA tumbled by nearly 7%. PSU banks also faced the brunt of the sell-off, with Canara Bank, Punjab National Bank, Bank of Baroda, and Bank of India all falling by more than 5%. The Nifty PSU index plunged 4.3% to 7,202 points, and the BSE PSU index dropped 3.4% to 19,760 points, with 54 of its constituents trading in the red. The RBI’s move is aimed at strengthening the financial resilience of banks and financial institutions and reducing the risk associated with project loans. However, the impact on PSU stocks has been severe, with investors concerned about the potential implications for earnings and profitability. The revised regulations are expected to increase the cost of funding for projects, which could weigh on margins and impact the overall financial performance of the affected companies.
PSU Stocks Crash Today: Here’s Why
