Bank shares tank after Moody's changes outlook on Indian banks to negative

Bank shares on Friday dropped up to 15.5 per cent after Moody's Investors Service changed the outlook for Indian banking system to negative from stable.

The scrip of RBL Bank tumbled 15.53 per cent, Axis Bank dipped 9.16 per cent, IndusInd Bank 8.49 per cent, ICICI Bank 8.01 per cent, SBI 5.92 per cent.

Also, City Union Bank fell 3.67 per cent, Federal Bank 3.51 per cent, Kotak Mahindra Bank 2.01 per cent and HDFC Bank 1.95 per cent.

The BSE Bank index closed lower by 5.39 per cent.

Moody's Investors Service on Thursday changed the outlook for Indian banking system to negative from stable, as it expects deterioration in banks' asset quality due to disruption in economic activity from the coronavirus outbreak. It said banks' asset quality will deteriorate across the corporate, small and medium enterprises and retail segments, leading to pressure on profitability and capital.

"We have changed the outlook for the Indian banking system to negative from stable. Disruptions to economic activity from the coronavirus outbreak will exacerbate a slowdown in India's economic growth," Moody's said.

Banks were the biggest drag for the 30-share BSE barometer which ended 674.36 points lower at 27,590.95