Bank Nifty Dives 5% After Change In Insolvency Proceedings Criteria

Banking stocks plunged in trade, after the Finance Minister announced that the threshold to initiate insolvency proceedings were raised to Rs 1 crore from Rs 1 lakh earlier.

In a bid to give some relief to companies, which are likely to default on loans due to the Covid-19 stress, Finance Minister Nirmala Sitharaman on Sunday said no fresh insolvency will be initiated for one year under the Insolvency and Bankruptcy Code. Also, coronavirus-related debt will be excluded from definition of default, she said.

"Minimum threshold to initiative insolvency proceeding has been raised to Rs 1 crore from Rs 1 lakh to benefit MSMEs," the Finance Minister stated.The announcements are likely to have a direct impact on banks, which are already reeling under the prospect of bad debts.

Shares in ICICI Bank fell a huge 5 per cent, while State Bank of India dropped dropped 4 per cent, Axis Bank fell 5 per cent and HDFC Bank was down more than 4 per cent.

The Bank Nifty was down more than 5 per cent in trade.