Banking shares pares early losses as RBI cuts repo rate by 50 bps

Bank Nifty hit a high of 17,244 post RBI policy meet, recovered 3.5% from its intra-day low of 16,648 on the NSE.

Banking shares have staged a recovery from early morning lows and are trading higher by up to 3% on the bourses after the Reserve Bank of India (RBI) on Tuesday cut the repurchase, or repo, rate by 50 basis points to 6.75%, the lowest key interest rate in four years.

At 11:09 am, State Bank of India, IDBI Bank, Canara Bank, Union Bank of India, Bank of Baroda, Yes Bank and Bank of India were trading higher by more than 1% each.

Bank Nifty, the banking shares index, was up nearly 1% or 105 points at 17,206 as compared to 0.07% rise in the CNX Nifty.

The banking index hit a high of 17,244 post RBI policy meet, recovering 596 points or 3.5% from its intra-day low of 16,648 touched before the meet.

The RBI said, the banks are permitted to hold investments under the held to maturity (HTM) category in excess of the limit of 25% of their total investments, provided the excess comprises only statutory liquidity ratio (SLR) securities and the total SLR securities held under the HTM category are not more than 22% of net demand and time liability (NDTL).

The SLR has been reduced to 21.50% of NDTL with effect from February 7, 2015. To align them, it has been decided to bring down the ceiling on SLR securities under HTM from 22% to 21.50% with effect from the fortnight beginning January 9, 2016. Thereafter, both the SLR and the HTM ceiling will be brought down by 0.25% every quarter till March 31, 2017, it added.