The Hindu Business Line : Bank stocks crash as RBI announces dividend policy

Selling was more active in public sector banks, especially those providing good dividend yield. Among the stocks to fall sharply were SBI, Bank of Baroda, Bank of India and Union Bank of India.

SBI was down 4.17 per cent at Rs 630.10, Bank of Baroda down 9.20 per cent at Rs 228.50, Bank of India down 10.36 per cent at Rs 72.25, Indian Overseas Bank down 9.24 per cent at Rs 61.90, and Canara Bank down 7.95 per cent at Rs 169.10.

Brokers said that there has been a fear in the market that most of the banks may not be able to pay dividend as their NPAs are over three per cent.

As per the circular issued by RBI last week, banks with NPAs of over three per cent have to seek RBI permission for announcing the dividend.

A dealer with a leading domestic broking firm said: "There is bit of concern in the market over the dividend issue as we have been advising several of our clients to buy bank stocks for dividend purpose."

However, top bank officials said that there is no need for concern over the dividend issues as banks seek RBI permission for dividend payment.

A dealer with a foreign broking firm said: "PSU bank stocks had gained sharply in the last one month and the derivatives positions in several banks derivatives contracts had also increased substantially. The RBI announcement just triggered the sharp fall which would have happened even without it."

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