Bank stocks, particularly those of state-run lenders, came under bear hammering on Tuesday following Reserve Bank of India’s latest framework that directs them to furnish details of stressed assets and defaulters every Friday starting 23 February.

The tough measures, announced by the RBI late on Monday, analysts say, although are intended to expedite resolution of piled-up bad loan accounts, especially of bigger borrowers, may also compel lenders to increase provisioning cover of such accounts from the current quarter.

To complicate the issue, Punjab National Bank, in a filing to exchanges on Tuesday, disclosed that it has detected a $1.8-billion fraud at one of its branch in Mumbai. The management said the matter has been reported to investigating agencies. PNB fears the fraud may spread to other lenders as it has apparently found out that money might have been advanced to these customers abroad in connivance with a section of lenders.

The 30-share Sensitive Index of Bombay Stock Exchange and the 50-scrip Nifty of National Stock Exchange resumed displaying upside momentum, raising hope of an average bull rally. But bank shares started weighing on these benchmarks as trade proceeded in Dalal Street. The indices plunged during the mid-session due to rise in volatility. The volatility marred day’s trading as the Sensex and the Nifty after showing signs of recovery during mid-session once again came under profit booking in last 45 minutes of trade.

The Sensex closed for the day at 34,155.95 points, registering a decline of 144.52 points or 0.42 per cent. The Nifty finished at 10,500.90 points, down 38.85 points or 0.37 per cent. The Bank Nifty was down 1.10 per cent or 360.35 points to end at 25,341.25 points. The Nifty PSU Bank cracked 4.78 per cent or 166 points to end at 3,307.05 points. In the Sensex pack, 11 shares ended up and 20 were down. For the Nifty, the advance-decline ratio stood at 14 versus 36.

Punjab National Bank, State Bank of India, Bank of Baroda and IDBI Bank cracked up to six per cent in morning deals as investors resorted to major offloading as they felt the new RBI rules, replacing all other previous schemes such as SDR (strategic debt restructuring) and erstwhile Governor Raghuram Rajan’s S4A (scheme for sustainable structuring of stressed assets), are the most toughest-ever issued by the central bank.

Assessing the impact, ICICI Direct, in a note, said: “Evergreening of loans may no longer be an option with the requirement of weekly reporting in cases of accounts above Rs 500 crore. Existing SDR loans where the scheme is not yet implemented will fall into the default category and would thus require higher provisioning …overall this framework is negative from banking sector’s earnings perspective in near to medium term as provisioning surges. Rise in bond yields along with higher provisioning will keep earnings muted, especially for public sector banks. The recent recapitalisation allocations should be consumed for the cleansing of balance sheets and growth capital.”

Crisil Ratings holds opposite opinion as it says: “It may not lead to higher provisioning on an aggregate basis since banks are already steadily increasing those levels as resolution process is on. Banks have increased provisioning cover from 40 to 45 per cent to 55 to 60 per cent.” Besides, new framework would result in expediting stressed assets resolution as the RBI has given 180-day time limit to resolve defaulters’ accounts.