Bank of Maharashtra, UCO Bk, IOB: PSBs rise up to 6% on June 2; here's why

The Nifty PSU Bank index rose as much as 1.96 per cent to hit an intraday high of 7,010.45, with all its constituents trading in the green.

PSU Bank stocks rise: PSU bank stocks were in the spotlight on the first trading day of June—Monday, June 2, 2025—with individual stocks rallying up to 6 per cent in intraday deals. The surge came ahead of the Reserve Bank of India’s (RBI) monetary policy committee (MPC) meeting outcome, scheduled for Friday, June 6.

 

The Nifty PSU Bank index gained 2.5 per cent in the intraday trade, to hit a high of 7,150.95 on the NSE during the day. In the past two trading days, the index has rallied 5.5 per cent from a level of 6,780.70 which it touched on Thursday, May 29, 2025.

 

 

At 01:23 PM, the Nifty PSU Bank index, the top gainer among sectoral indices, was up 2.4 per cent as compared to a 0.14-per cent decline in the Nifty 50 index.

 

Bank of Maharashtra, Indian Overseas Bank, Union Bank of India, Uco Bank, Indian Bank, Central Bank of India, Punjab & Sind Bank, Bank of India, and Punjab National Bank were up in the range of 3 per cent to 7 per cent on the NSE. Further, shares of Indian Bank hit a record high of ₹644.90 as they rallied 5 per cent in the intraday trade.

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Why were PSU Bank stocks buzzing in trade?

Public sector bank (PSU) stocks were in focus ahead of the Reserve Bank of India’s (RBI) monetary policy committee (MPC) outcome, scheduled for Friday, June 6, 2025. 

 

According to a Business Standard poll, nine out of 10 respondents expect the MPC to cut the repo rate by 25 basis points (bps) to 5.75 per cent, while the State Bank of India has forecast a deeper 50-bps cut. 

 

The six-member committee will begin its three-day meeting on June 4, with the policy review announcement due at the end of the week.

 

All respondents agreed that the RBI is likely to lower its FY26 inflation projection from the current 4 per cent forecast made in April. 

 

With inflation softening and growth picking up, the central bank is seen continuing its shift toward an accommodative policy stance. The MPC had already reduced the repo rate by 25 bps each in February and April after keeping it steady for 11 consecutive meetings. READ MORE

Robust GST collections

Meanwhile, strong tax collections added to the upbeat mood. Net GST receipts grew 20.4 per cent year-on-year (Y-o-Y) to ₹1.73 trillion in May, boosted by a 72.9 per cent jump in Customs-related revenue and a decline in refund outgo.  Though sequentially lower than April’s record ₹2.09 trillion, gross GST collection in May stood at ₹2.01 trillion, up 16.4 per cent from a year ago. READ MORE

 

Higher GST collections indicate stronger government revenue and economic growth, boosting PSU banks' loan demand and reducing credit risks. This could improve their profitability and asset quality.

 

A shot in the arm: Cooling inflation boosts sentiment

India’s retail inflation eased to 3.16 per cent in April from 3.34 per cent in March, driven by a sharp fall in vegetable and pulses prices. This provides additional room for the RBI to support growth, especially after GDP data showed a robust 7.4 per cent expansion in the January–March quarter of FY25, ahead of the RBI’s 7.2 per cent forecast.

 

According to Ravi Singh, SVP of retail research at Religare Broking, Nifty PSU Bank witnessed a gain of nearly 24 per cent since March 2025 taking cues from RBI’s supportive policies to increase liquidity and fuelled optimism among major PSU banks and boost investor’s confidence. Along with this, higher GST collections have further pushed this rally, offering a strong tailwind for the growth trajectory of public sector banks.

 

“These combined factors have not only improved the operational outlook for PSU banks but have also assisted them for sustained growth in the long-term,” Singh said.

 

That said, the combination of likely rate cuts, moderating inflation, robust economic growth, and buoyant tax revenues provided a shot in the arm for PSU bank stocks, which outperformed in anticipation of a growth-friendly policy outcome.  "Government's push for consumption and capex through measures announced in Union Budget, record GST collections, robust outlook of agricultural sector, strong corporate and bank balance sheets will provide impetus to growth momentum. With cyclical recovery already underway, monetary policy support in terms of rate cuts, liquidity support and regulatory easing," Indian Bank said in its FY25 annual report. 

Banking Sector Outlook

The timely intervention by the RBI through various measures including CRR reduction, repo rate cuts, regulatory adjustments, Open Market Operations (OMO), Variable Rate Repos (VRR), and currency swaps etc., have helped in arresting the outflow of foreign direct investments (FDIs) from the Indian Banking sector. 

 

The liquidity crunch and higher base impacted credit growth in banks. Bank credit was driven by government-led capital expenditure and robust demand for housing and vehicle loans. However, the rollback of the risk weight circular on bank lending to Non-Banking Financial Companies (NBFCs), combined with a reduction in the repo rate, improved liquidity conditions and measures in the Union Budget, are expected to bolster credit expansion in FY26, Indian Bank said in annual report.