Why is the share price of Indian Overseas Bank (IOB) going up?

 

The News Cover: Hi, today at 9.20 am, Indian Overseas Bank’s share price increased by almost 20%. Talking about till 11.40 am, the share price of IOB was up by 12.96%. Central Bank’s share price was also 10.14% by 11.40 am. 

In today’s article, we will tell you the reasons behind the sharp rise in these 2 PSU banks. On Wednesday i.e, 29th Sept 2021, the Reserve Bank of India took out Indian Overseas Bank from its Prompt Corrective Action (PCA) framework. The lending curbs and restrictions over IOB will be removed. 

Due to deterioration in IOB’s weak asset quality and operating matrix, in Oct 2015, it was included in the PCA framework. On the decision of removing IOB from the PCA framework, RBI said that the financial superficial board reviewed Indian overseas bank’s previous financial year’s results. They found improvement in asset quality of IOB and not breaching PCA norms. 

Also, RBI said that IOB has given a written commitment to comply with Minimum Regulatory Capital, net NPA, leverage ratio norms. Before this, on 8th Sept 2021, RBI took UCO Bank out of the PCA framework. You must be wondering what PCA framework is. Generally, RBI puts those banks in this framework whose financials are risky. 

This framework judges banks based on 3 parameters. Capital ratios, Asset Quality, and Profitability. Other than IOB, the Central Bank of India is the only PSU bank which is included in the PCA list. After the news of taking out IOB from PCA, investors are speculating that the Central Bank of India can also be removed from PCA. 

This can be a possible reason for the increase in the share price of the Central Bank. These are the reasons why the share prices of IOB and Central Bank went up. I hope you found today's article informative. Remind you that this article is for educational purposes only and there's no buy or sell recommendation.