Theoretically, it seems like a nice idea. However, if that really happens, the whole financial sector of India could see a major turmoil, which could significantly impact the economy negatively. Plus, a (big) mistake of one bank should have implications ricochet to other banks. That would be just unfair. Remember, PSU banks employ lakhs of people across the country. If investors boycott their shares, imagine the affect it would have on so many families. And it is quite unjust to punish so many people for wrongdoing of handful of people.
So boycotting PSU banks shares would not be a great idea. Of course, it could have these institutes learn important lessons and push them to pick up more robust regulations. But to do that, we don’t really need to take any such extreme step. There are plenty other things we can do, the government can do to make sure such instances of bad loans don’t happen so often.
The government can bring effective laws. The banks recheck their own regulatory bodies. The common people like you and me, along with media, can put more pressure on the authorities to improve things and to ensure people like Nirav Modi and Vijay Mallya gets snatched and punished very quickly.