Investors Rush to Sell Stocks Due to Nitaqat Policy of Saudi Arabia
15 April 2013
Trivandrum
Kerala-based lenders have seen a sharp erosion in the value of their shares in the past fortnight after Saudi Arabia initiated a clampdown on illegal immigrant workers and brought in regulations that stipulated reservation of 10% of jobs for citizens. The new rule, known as Nitaqat, is likely to impact over 300,000 low- and semi-skilled Indian workers, most of whom are from Kerala.
Any job losses can have ramifications on the flow of non-resident Indian (NRI) deposits and remittance funds to the southern state, routed primarily through Kerala-based lenders such as State Bank of Travancore (SBT), Federal Bank Ltd, South Indian Bank Ltd (SIB) and Dhanlaxmi Bank Ltd. Since 28 March, shares of Federal Bank have dropped 8.31%, SIB by 7.33% and Dhanlaxmi by 3.72%. Shares of SBT, a relatively illiquid stock, have dropped marginally.
Among these lenders, SBT has Rs.19,200 crore in NRI deposits—the largest among the four lenders—followed by Federal Bank (Rs.12,900 crore) and SIB (Rs.6,000 crore). Dhanlaxmi Bank’s NRI deposits are at about Rs.1,000 crore. These banks typically offer 7-9% interest on NRI deposits.Abhraham Chacko, executive director, Federal Bank, said the fall in stock prices was just a “knee jerk” reaction to the change in the Saudi law.Chacko said about 7% of total remittances to India from the world are through Federal Bank. India was the top receiver of global remittances in 2012, getting $70 billion, ahead of China, which got $66 billion, according to the World Bank.
Source – http://www.livemint.com/Industry/pjgkRMaevqK2noVLiHSbxJ/Investors-rush-to-sell-Kerala-banks-stocks.html
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