Bank stocks slide as RBI maintains status quo

MUMBAI: Bank stocks came under selling pressure as the Reserve Bank kept interest rates unchanged at the monetary policy review today.

Shares of ICICI Bank ended 0.28 per cent lower, while SBI was down 0.03 per cent on the BSE. Bank of India declined 1.91 per cent, Kotak Mahindra Bank lost 1.46 per cent, while IDBI Bank was down 1.27 per cent, PNB (0.69 per cent) and Canara Bank (0.36 per cent). The BSE bankex index settled on a flat note, 0.18 per cent lower at 17,478.99.

"Main highlight for today was RBI's monetary policy, wherein, the RBI maintained status quo over lending rates and reduced SLR by 50 bps. The reaction was mixed, as banking stocks showed some selling pressure," said Nidhi Saraswat, Senior Research Analyst, Bonanza Portfolio Ltd.

Maintaining its cautious stance, RBI kept key policy rates unchanged but unlocked about Rs 40,000 crore of banking funds by cutting the SLR while promising to ease the rates if inflation softens at a faster pace.

This is the second consecutive time that RBI Governor Raghuram Rajan has kept interest rates unchanged, belying hopes of a reduction in EMIs for home and auto loans. The repo rate, at which the RBI lends to banks, has been retained at 8 per cent and the cash reserve ratio (CRR) has been kept unchanged at 4 per cent.

The statutory liquidity ratio (SLR), the mandatory amount of bonds lenders must park at the RBI, has been cut by 0.5 per cent to 22.5 per cent of their net demand and time liabilities (NDTL) with effect from June 14.