Banking stocks are under pressure after the Reserve Bank of India (RBI) said there is little room to ease monetary policy further.
State Bank of India, Punjab National Bank, Canara Bank, Union Bank of India, Karnataka Bank and Dena Bank are down more than 3% each on the Bombay Stock Exchange (BSE).
The BSE banking index, Bankex is down 1.7% or 252 points compared to 0.56% fall in benchmark Sensex at 1117 hours.
RBI has warned that the risk of inflationary pressure persists despite a recent sharp decline in wholesale price index (WPI) inflation, and said a high current account deficit poses the biggest risk "by far" to the Indian economy.
“With upside risks to inflation still significant in the near term in view of sectoral demand supply imbalances, ongoing correction in administered prices and pressures stemming from minimum support price (MSP) increases, monetary policy cannot afford to lower its guard against the possibility of resurgence of inflation pressures,” RBI said in a statement.
Monetary policy will also have to remain alert to the risks on account of the CAD and its financing, which could warrant a swift reversal of the policy stance, it added.
Meanwhile, the RBI cut repo rate 25 basis points to 7.25%, its lowest since May 2011, and kept the cash reserve ratio (CRR) for banks unchanged at 4%.
State Bank of India, Punjab National Bank, Canara Bank, Union Bank of India, Karnataka Bank and Dena Bank are down more than 3% each on the Bombay Stock Exchange (BSE).
The BSE banking index, Bankex is down 1.7% or 252 points compared to 0.56% fall in benchmark Sensex at 1117 hours.
RBI has warned that the risk of inflationary pressure persists despite a recent sharp decline in wholesale price index (WPI) inflation, and said a high current account deficit poses the biggest risk "by far" to the Indian economy.
“With upside risks to inflation still significant in the near term in view of sectoral demand supply imbalances, ongoing correction in administered prices and pressures stemming from minimum support price (MSP) increases, monetary policy cannot afford to lower its guard against the possibility of resurgence of inflation pressures,” RBI said in a statement.
Monetary policy will also have to remain alert to the risks on account of the CAD and its financing, which could warrant a swift reversal of the policy stance, it added.
Meanwhile, the RBI cut repo rate 25 basis points to 7.25%, its lowest since May 2011, and kept the cash reserve ratio (CRR) for banks unchanged at 4%.
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