Banks turn volatile after RBI maintains status quo

Bank stocks turned volatile after the Reserve Bank of India (RBI) kept the policy repo rate unchanged at 4% while maintaining its accommodative stance after the conclusion of the Monetary Policy Committee (MPC) meeting today, 6 August 2020.

Among the private sector banks, Bandhan Bank (down 1.94%), Axis Bank (down 0.83), RBL Bank (down 0.8), Federal Bank (down 0.76), IndusInd Bank (down 0.38), ICICI Bank (down 0.11) and City Union Bank (down 0.09) declined.

Among the public sector banks, Punjab & Sind Bank (down 1.12%), Canara Bank (down 0.92%), Central Bank of India (down 0.86%), Bank of Baroda (down 0.32%), Punjab National Bank (down 0.31%) and Bank of India (down 0.1%) edged lower.

The Nifty was up 96.60 points, or 0.87% to 11,198.25.

RBI kept Marginal Standing Facility (MSF) rate, bank rate and reverse repo rate unchanged. The accommodative stance continues. The MPC had convened the three-day meeting on Tuesday, 4 August.

RBI Governor Shaktikanta Das said inflation is expected to stay elevated in Q2 FY21 but it is likely to ease in H2 aided by favourable base effects. Real GDP growth will remain in the negative, Das said. However, he added that any positive news on the COVID-19 containment efforts would change this scenario. RBI is taking measures to enhance liquidity support, further ease financial stress.

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