Indian Overseas Bank shares spurt 20% as RBI takes PSU bank out of PCA norm – What investors should know

The state-owned PSU (public sector undertaking) bank — Indian Overseas Bank shares jumped 20 per cent to Rs 24.6 per share on the BSE intraday trade today, as the Reserve Bank of India removed it from Prompt Corrective Action (PCA) framework on Wednesday. 

This is the second such PSU bank in September to be out of PCA norms, as UCO Bank has withdrawn too from the framework. 

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Taking all the parameters into consideration, The RBI in its official release said, “It has been decided that Indian Overseas Bank is taken out of the PCA restrictions subject to certain conditions and continuous monitoring.” 

RBI said, “The performance of the Indian Overseas Bank, which was under the Prompt Corrective Action Framework (PCAF) of RBI, has been reviewed by the Board for Financial Supervision.” 

The bank has provided a written commitment that it would comply with the norms of Minimum Regulatory Capital, Net NPA and Leverage ratio on an ongoing basis, the central bank said in a release, adding further that it has apprised of the structural and systemic improvements that it has put in place which would help the bank in continuing to meet these commitments. 

In the last five days, the stock has been hovering around Rs 20 per share level and this news has acted as trigger to surge more. Apparently, the PSU bank stocks lately have been gaining most defying the markets sentiment, as of today the index has gained near 2 per cent. 

At around 09:55 am, the stock is trading near 15 per cent higher to Rs 23.35 per share on the BSE, as compared to 0.02 per cent decline in the S&P BSE Sensex. 

Followed by trigger from IOB, other PSU stocks such as Central Bank gained over 10 per cent and Bank of Maharashtra jumped almost 9 per cent. While Punjab and Sindh Bank gained over 4 per cent and UCO Bank surged near 4 per cent in other wise flat trade on Thursday.