Share markets in India continued to trade in the red during closing hours on escalating Indo-Pak tensions and ended their trading session marginally lower. Sectoral indices ended on a mixed note with stocks in the consumer durable sector and power sector witnessing most of the selling pressure.

At the closing bell, the BSE Sensex stood lower by 68 points (down 0.2%) and the NSE Nifty closed down by 29 points (down 0.3%). The BSE Mid Cap index ended the day up 0.4%, while the BSE Small Cap index ended the day up 0.2%.

The rupee was trading at 71.25 against the US$.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was down by 0.1% and the Shanghai Composite was up by 0.4%. The Nikkei 225 was up 0.5%.

From the commodity space, crude oil was witnessing buying interest today. Gains were seen after a report stated declining crude inventories in the country.

Gains also came as producer club the Organization of the Petroleum Exporting Countries (OPEC) seemed to stick to its supply cuts despite the pressure from US President Donald Trump.

Note that yesterday Donald Trump had called on the Organization of the Petroleum Exporting Countries (OPEC) to ease its efforts to boost the markets with supply cuts.

Max India share price was also in focus today as the after the company sold its entire 51% stake in Max Bupa Health Insurance Co Ltd (Max Bupa) to private equity firm True North Fund VI LLP for over Rs 5.1 billion.

Max India said the deal has been at a consideration of Rs 5.1 billion, which the company will receive at the time of completion of the proposed transaction.

From the banking space, Allahabad Bank share price, Corporation Bank share price, and Dhanlaxmi Bank share price were in focus today on the back of Reserve Bank of India's (RBI) move to take them out of prompt corrective action (PCA) framework.

The central bank took them out of the PCA framework following improvement in their financial ratios.

Note that last year, in May, Finance minister Piyush Goyal had promised all possible support to the 11 state-run banks that are under the RBI's PCA framework. He had also expressed confidence that public sector banks will overcome legacy issues very soon.

After meeting chief executives of these 11 PSBs, he said that it will be ensured that the central government gives every possible support to further strengthen the resolve of these banks to come out of PCA framework as quickly as possible.

The 11 banks under PCA were Dena Bank, United Bank of India, Allahabad Bank, Corporation Bank, UCO Bank, Bank of India, IDBI Bank, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce and Bank of Maharashtra.

PCA is the process to ensure that banks do not go bust. Under the process, the RBI has put in place some trigger points to take corrective actions on banks which are weak and troubled.

Note that PSB's are in the spotlight for their growing bad loan problems and the painful issue of willful defaulters.

Banks, in principle, must be careful about not extending loans to borrowers with poor creditworthiness or payment track record. That too, irrespective of the size of the borrower.

However, the data from State Bank of India shows that when it comes to big corporate borrowers, our banks literally look the other way. The share of large corporates, in total advances of the banking sector, has almost remained unchanged over past three years (at an average of 55%).

However, their contribution to incremental slippages has been huge. At one point, the big corporate borrowers accounted for nearly 90% of total NPAs of the sector.

Therefore, according to us, banks with large corporate books deserve a lower valuation if they can't keep NPAs in check.

Also, speaking of bad loans and PCA, one should note that there are faster recoveries happening since the Insolvency and Bankruptcy Code (IBC).

If we consider two successful closures, i.e. Bhushan Steel and Electrosteel, the lenders have already recovered close to Rs 421 billion.

Faster Recoveries Under the IBC

The government expects close to Rs 1.8 trillion through the IBC. Similarly, banks expect to write back more than Rs 1 trillion from the resolution of the 'Dirty Dozen' constituting 12 big NPA accounts referred to IBC by the RBI.

This is what the RBI said in its report on trend and progress in the banking industry:

• Banks can take advantage of the IBC to clean up their balance sheets and improve performance on a sustained basis to remain competitive. Instead of waiting for regulatory directions, banks can file for insolvency proceedings on their own to realize promptly the best value for their assets.

The IBC is positive for the long-term health of the banking system and it is evolving with time.

More importantly, lending in the next credit cycle will be more disciplined as a result of the above developments.