Banks mixed after RBI keeps key interest rates unchanged

Bank shares were mixed at 11:08 IST on BSE after the Reserve Bank of India kept key rates unchanged in its monetary policy review today, 3 February 2015.

Among private sector banks, Axis Bank (down 1.68%), ING Vysya Bank (down 1.51%), HDFC Bank (down 1.25%), Kotak Mahindra Bank (down 0.86%), Federal Bank (down 0.52%), City Union Bank (down 0.37%) and Yes Bank (down 0.02%), edged lower. IndusInd Bank (up 0.13%) and ICICI Bank (up 0.5%), edged higher.

Among public sector banks, Bank of Baroda (up 1.94%), Bank of Maharashtra (up 1.20%), Punjab and Sind Bank (up 0.91%), State Bank of India (up 0.91%), United Bank of India (up 0.72%), Dena Bank (up 0.53%), Central Bank of India (up 0.43%), Indian Bank (up 0.35%), Bank of India (up 0.33%), Union Bank of India (up 0.24%), Vijaya Bank (up 0.20%) and Corporation Bank (up 0.07%), edged higher. Canara Bank (down 0.11%), Andhra Bank (down 0.32%), IDBI Bank (down 0.35%), Allahabad Bank (down 0.52%), UCO Bank (down 0.91%), Syndicate Bank (down 1%) and Punjab National Bank (down 1.12%), edged lower.

The BSE Bankex was down 0.71% at 22,620.18, off from the day's high of 22,911.67. It underperformed the Sensex, which was down 0.20% at 29,062.62.

The Reserve Bank of India (RBI) kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.75%. Consequently, the reverse repo rate under the LAF will remain unchanged at 6.75%, and the marginal standing facility (MSF) rate and the Bank Rate at 8.75%.

It kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL).

RBI, however, reduced the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22% to 21.5% of their NDTL with effect from the fortnight beginning 7 February 2015.

RBI said it will replace the export credit refinance (ECR) facility with the provision of system level liquidity with effect from 7 February 2015.

The central bank will continue to provide liquidity under overnight repos of 0.25% of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75% of NDTL of the banking system through auctions and continue with daily variable rate term repo and reverse repo auctions to smooth liquidity.

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