Uncertainty over a loan waiver scheme in the state has added to existing concerns about foreign investors selling in banks as part of their risk-off sentiment against Indian equities.
Bank Nifty fell more than 4.3% during Monday’s session before closing 3.1% lower, compared with a 1.7% drop in the benchmark Nifty.
Losses were sharpest among government lenders. The Nifty PSU bank index fell nearly 4%, while the Nifty private bank index fell 2.8%.
InstitutionsDamages to sovereign borrowers with high exposure to agricultural debt are steeper; Analysts say the break in banking stocks is a buying opportunity
“Selling in bank stocks accelerated in the last few sessions after the Maharashtra government waived off loans of farmers with outstanding loans of up to Rs 2 lakh,” said Christy Matthai, fund manager at Quantum Mutual Fund. “Since PSU banks have a high level of agricultural loans, the decline in this sector is very rapid.”
On Friday, Maharashtra Chief Minister Devendra Fadnavis announced a farm loan waiver of up to Rs 2 lakh for eligible farmers, with a focus on infrastructure spending in the state budget. Under the Punyashlok Ahilyadevi Farm Loan Waiver Scheme, farmers with outstanding loans of up to Rs 2 lakh till September 30, 2025, will get a waiver. Farmers who have regularly paid their loans will get a “recruitment benefit” of up to Rs 50,000, the chief minister said.
All 14 sectors of the Bank Nifty ended lower on Monday, with Union Bank of India falling 4.7%. IDFC First Bank and Federal Bank each fell around 4.5%, while Indus Bank fell 4.1%. Canara Bank and State Bank of India fell more than 3.5% each. Mati said the continued sell-off by foreign investors is also weighing on private sector lenders.
“The top holdings in foreign portfolios are large private banks, and in uncertain times investors typically sell more liquid names rather than illiquid names,” he said.
Banks, which have the highest weighting in the benchmark indices, have suffered from extensive foreign selling in Indian markets.
