Analysts say the risk perception about banks has heightened in the recent past. The report of an RBI inspection of banks revealing massive underestimation of non-performing assets has increaxsed the anxiety for FIIs. Although under-reporting of NPAs was always suspected, the official confirmation (though in a confidentail report) of this practice has turned the perception negative. Some marketmen also feel that the prospect of interest rates firming up and the effect that it would have on provisioning requirements of banks hadalso contributed to the nervous selling in the market.

Contraction of credit growth and a fall in the market share of public sector banks, in both lending as well as deposits, are also cited as the reason for the current drubbing of banking stocks on the bourses. According to RBI figures, nationalised banks have lost market share during the first quarter of the current fiscal to foreign banks.

The public sector banks' share of overall credit has fallen to 47.8 per cent for the first quarter of the current fiscal from 48.3 per cent in the previous quarter. Their share in the overall deposits has also fallen from 54.7 per cent to 54 per cent. Also, during the March-April period of this year, deposit growth was the highest in the last nine years against a contraction in credit growth. This would make bank's spreads thinner as the decline in deposit rates is less than the fall in credit rates.

In the past ten trading sessions, Bank of Baroda has shed almost Rs 20, from Rs 76 on September 24 to Rs 56.5 onOctober 12. The scrip now quotes at a considerable discount to its offer price of Rs 85. Bank of India is now trading at its all-time low of Rs 22 after falling from a high of Rs 30 on September 30. In the past 10 trading sessions, the scrip has shed almost Rs 5.

Market favourite, Corporation Bank has fallen by Rs 22 in just 10 trading sessions, from a level of Rs 114 on September 24 to the current level of Rs 92. ICICI Banking Corporation nd Dena Bank are also trading at their lows of 27 and Rs 16, respectively.

In the past 10 trading sessions, the other banking stocks like HDFC Bank fell by Rs 10 and Oriental Bank shed Rs 8. Jammu and Kashmir Bank is now trading at a new low of Rs 21 against its offer price of Rs 38.