Banking stocks fall on concern new norms may hit profits

Mumbai, May 3 (IANS) The share price of banking stocks fell sharply Thursday, a day after the Reserve Bank of India (RBI) announced guidelines for implementing Basel III norms that mandate lenders to keep aside a higher percentage of capital that may hit their profits.

The country's largest private sector lender ICICI Bank slumped 2.46 percent at Rs.860. The largest lender State Bank of India fell 1.85 percent to Rs.2099.90.

Axis Bank was down tumbled 3.65 percent to Rs.1,062 at the Bombay Stock Exchange.

The banking index of the Bombay Stock Exchange was down 1.52 percent at 11,680 points in the afternoon trade, while the benchmark Sensex was down 0.71 percent.

The Reserve Bank of India (RBI) Wednesday issued guidelines for implementation of Basel III norms which will be effective from Jan 1, 2013 in a phased manner.

The new norm, which will be fully implemented by March 31, 2018, is expected to make lenders keep aside around Rs.1.5 lakh crore more in capital.

The requirement of additional capital for doing the same level of business will adversely affect return on assets and profitability. It will reduce the amount of money bank can lend.

"For the financial year ending March 31, 2013, banks will have to disclose the capital ratios computed under the existing guidelines (Basel II) on capital adequacy as well as those computed under the Basel III capital adequacy framework," the RBI said.

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