Bank Shares Drop After Indian Regulator Tightens Bad Loan Norms

Shares of Indian lenders fell after the regulator tightened rules that will require banks to set aside more capital against potential losses on their loan and credit portfolios.

The NSE Nifty Bank Index fell 1% on Tuesday, compared to a 0.4% decline in the broader market. The Nifty Private Bank Index was trading 0.8% lower while the Public Sector Bank Index was down nearly 2%. Macquarie Capital Securities analyst Suresh Ganapathy said in a note that while most private banks are conservative as they provide more for overdue loans and carry contingent buffers, state-run lenders usually avoid such practices, leaving them staring at potentially higher provisioning needs.