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Bank stocks edge higher after RBI status quo on policy rates

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Bank stocks edged higher at 11:29 IST on BSE after the Reserve Bank of India in its monetary policy meeting today, 7 June 2016, kept key policy rates steady.

Among public sector banks, Central Bank of India (up 0.18%), Bank of Baroda (up 0.03%), Bank of India (up 0.36%), IDBI Bank (up 0.01%), State Bank of India (up 1.78%), United Bank of India (up 1.14%) and Indian Bank (up 2.58%) edged higher. Union Bank of India (down 0.47%), Punjab National Bank (down 0.45%), Canara Bank (down 0.28%) and Vijaya Bank (down 0.16%) edged lower.

Among private sector banks, ICICI Bank (up 1.93%), Yes Bank (up 1.76%), IndusInd Bank (up 0.04%) and Kotak Mahindra Bank (up 0.02%) edged higher. HDFC Bank (down 0.03%) edged lower.

Meanwhile, the S&P BSE Sensex was up 80.19 points or 0.3% at 26,857.64.

The Reserve Bank of India (RBI) in its second bi-monthly monetary policy meeting today, 7 June 2016, kept its benchmark interest rate viz. the repo rate unchanged at 6.5%. The central bank also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL). The central bank said it continues to provide liquidity as required and will progressively lower the liquidity deficit in the banking system from 1% of NDTL to a position closer to neutrality.

RBI Governor Raghuram Rajan said in his monetary policy statement that the central bank will monitor macroeconomic and financial developments for scope for reduction in the repo rate. RBI has retained its March 2017 inflation projection of 7%. Rajan said that incoming data in the next few months will provide more clarity regarding RBI's March 2017 inflation target of 7%. The central bank has pointed out some upside risks to inflation such as firming international commodity prices, the implementation of the 7th Central Pay Commission awards, the upturn in inflation expectations of households and of corporates and the stickiness in inflation excluding food and fuel. Rajan said that the stance of monetary policy remains accommodative.

The government's reform measures on small savings rates combined with the central bank's refinements in the liquidity management framework should help the transmission of past policy rate reductions into lending rates of banks, RBI said. The central bank said it will shortly review the implementation of the Marginal Cost Lending Rate (MCLR) framework by banks. Timely capital infusions into constrained public sector banks will also aid credit flow, RBI said.

Axis Bank fell 1.05% at Rs 528.50. Axis Bank yesterday, 6 June 2016, announced the commencement of trading of its green bond on the London Stock Exchange. The bank had raised $500 million from the green bond issue. The bank has listed its entire $5 billion Medium Term Note (MTN) programme on the London Stock Exchange. The proceeds of the bond will be invested in green energy, transportation and infrastructure projects, reinforcing India's commitment to produce 175,000 megawatts (MW) of renewable power by 2022.

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First Published: Tue, June 07 2016. 11:27 IST
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