Bank stocks faced selling pressure on Tuesday in line with a bearish trend in equities amid concerns over tighter regulatory norms.
The BSE PSU Bank index fell by 2.20 per cent to end at 4,854.92.
Shares of Union Bank of India declined 3.07 per cent, Bank of Maharashtra dropped 2.53 per cent, Canara Bank (2.42 per cent), Bank of India (2.27 per cent), Bank of Baroda (2.26 per cent), PNB (2.19 per cent), Indian Bank (1.88 per cent), State Bank of India (1.88 per cent), Central Bank of India (1.26 per cent), UCO Bank (1.20 per cent) and Indian Overseas Bank (1.05 per cent) on the BSE.
The BSE Bankex index fell by 1.61 per cent to 62,360.06.
Shares of Axis Bank lost 2.65 per cent, IDFC First Bank declined 1.92 per cent, ICICI Bank (1.77 per cent), IndusInd Bank (1.68 per cent) and HDFC Bank (0.96 per cent).
In the equity market, the 30-share BSE Sensex declined 416.72 points or 0.54 per cent to settle at 76,886.91. The 50-share NSE Nifty dropped 97 points or 0.40 per cent to end at 23,995.70.
"Sectoral trends were mixed, with financials among the key laggards, with PSU Banks and Private Banks declining on concerns around tighter regulatory norms. The Reserve Bank of India has finalised the implementation of the Expected Credit Loss (ECL) framework from April 2027, replacing the incurred loss model with a forward-looking system that enables earlier recognition of credit risks and continuous monitoring.
"In the near term, this transition is likely to increase provisioning requirements and weigh on margins, particularly for PSU banks and lenders with higher exposure to unsecured and MSME segments. However, over the longer term, the framework is expected to enhance balance sheet transparency, strengthen financial stability and support more efficient capital allocation, with large private banks better positioned to navigate the transition." Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd, said.
The Reserve Bank on Monday declined pleas for more time to transition to the expected credit loss (ECL)- based provisioning, making it clear that the newer system will be implemented from April 1 next year.
In the 'Directions on Asset Classification, Provisioning, and Income Recognition for Commercial Banks', the RBI said banks had given feedback seeking more time for the transition as they need to build databases and models, and upgrade systems.
Declining to accept the feedback to the draft first issued on October 7, 2025, the RBI said, "Banks have been provided a one-year timeline to prepare their internal systems for implementation of the new framework." At present, banks make a provision against an asset once the loss is incurred, while under ECL, they will move to a much more proactive system. It is widely believed to increase the provisions in the banking system.
"Banking stocks led the decline after the RBI confirmed its expected credit loss framework and final asset classification norms, raising concerns over higher provisioning," Vinod Nair, Head of Research, Geojit Investments Limited, said.
The central bank also said on Monday that it has provided some measures to ease the transition to ECL, including the provision of a calibrated transition framework, including transitional arrangements for one-time capital impact on account of ECL transition, a three-year timeline for application of Effective Interest Rate (EIR) on legacy loan accounts and guidance provided on key implementation issues.
"On the sectoral front, banking and financial stocks acted as a key drag. Weakness in names such as Axis Bank weighed on the broader indices. Additionally, sentiment in public sector banks deteriorated sharply following the Reserve Bank of India's finalisation of the Expected Credit Loss framework.
"The shift to a forward-looking provisioning model is expected to increase capital requirements and impact profitability, triggering broad-based selling across PSU banks," Hariprasad K, Research Analyst and Founder, Livelong Wealth, said.
Published on April 28, 2026