Banking stocks rally as RBI delivers surprise rate and CRR cuts; Nifty Bank jumps 1.6%, Nifty Fin Services surges 2%
Shares of banking and financial services companies soared on Friday after the Reserve Bank of India (RBI) delivered a larger-than-expected 50 basis point (bps) cut in the benchmark repo rate and a surprise 100 bps reduction in the Cash Reserve Ratio (CRR). The Monetary Policy Committee's (MPC) aggressive move, along with a shift in policy stance from 'accommodative' to 'neutral', injected fresh optimism into the markets.
The RBI cut the repo rate to 5.50 percent and slashed the CRR by 100 bps in a staggered manner, signaling a clear pivot toward boosting liquidity and credit growth. The CRR, which dictates the portion of deposits that banks must park with the central bank, will now be reduced by 25 bps each over four tranches starting September 6 through November 29, 2025. According to RBI Governor Sanjay Malhotra, this move will infuse approximately ₹ 2.5 trillion into the banking system by the end of the year.
In tandem, the Standing Deposit Facility (SDF) rate has been adjusted to 5.25 percent and the Marginal Standing Facility (MSF) rate now stands at 5.75 percent.
Reacting to the policy announcement, the Nifty Bank index surged 1.66 percent, Nifty Financial Services gained nearly 2 percent, Nifty Private Bank climbed 2 percent, and the Nifty PSU Bank index advanced 0.6 percent. IDFC First Bank led the gainers, rallying 7 percent, while AU Bank climbed 4 percent. Axis Bank, HDFC Bank, and IndusInd Bank also rose 2–3 percent intraday.
Devarsh Vakil of HDFC Securities termed the policy a 'jumbo rate cut' and emphasized that the liquidity injection from the CRR reduction will aid bank margins and bolster private sector investment in the second half of FY26. While global headwinds remain—from US tariffs to geopolitical tensions—the growth-inflation dynamic offered sufficient rationale for monetary easing.
Chanchal Agarwal, CIO of Equirus Credence Family Office, highlighted that the RBI's cumulative easing of 100 bps in 2025, coupled with a record ₹ 2.69 trillion dividend and ₹ 9.5 trillion in liquidity infusions since January, marks a strong pro-growth stance. He, however, cautioned that further rate cuts may be limited going forward, especially with the MPC adopting a 'neutral' stance.
Sundeep Mohindru of M1xchange noted the policy's positive implications for MSMEs. 'Lower rates and higher liquidity will improve formal credit flow to small businesses through microfinance and TReDS platforms. The CRR cut ensures more active participation by banks,' he said.
InCred Equities, in its latest banking sector update, cautioned that the repo rate downcycle could squeeze net interest margins (NIMs), particularly for state-owned enterprises (SOE) banks. Large private banks, they said, are better positioned to weather the margin pressure due to their stronger starting point and more flexible pricing strategies.
The brokerage maintained an 'ADD' rating on Axis Bank, HDFC Bank, and ICICI Bank, and said HDFC Bank may outperform ICICI over the coming years due to stronger deposit growth. Among PSUs, Punjab National Bank and Canara Bank earned 'ADD' ratings for their on-balance sheet liquidity buffers and margin levers. However, State Bank of India and Bank of Baroda received 'HOLD' ratings due to elevated valuations.
In conclusion, the RBI's surprise double-barreled action—cutting both the repo rate and CRR—has breathed fresh life into Indian banking stocks, with broader implications for liquidity, credit growth, and private investment. While the front-loaded easing cycle could taper off, analysts believe that the immediate impact will be supportive of economic momentum and market sentiment. As transmission kicks in and liquidity flows rise, sectors such as banking, real estate, and MSMEs are expected to be the key beneficiaries of this bold monetary policy shift.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Time of India
2 hours ago
- Time of India
Retail Direct: RBI enables auto-bidding facility using NACH mandate for investing in T-Bills; Know how it will work
What are the key features of the auto-bidding facility? Academy Empower your mind, elevate your skills Auto-bidding is available only for T-bills and requires a valid NACH mandate. Types of Rules: The rules can be amended, paused or cancelled anytime. Auto-bid is funded through NACH mandate linked to your registered bank account in the Retail Direct. Sufficient balance in the registered bank account is needed for funding the Auto-bid. Email and SMS alerts are sent for Auto-bid Rule creation, amendment, cancellation, expiry, bid placement, etc. What are treasury bills? What are the day count conventions used in calculating bond yields? The Reserve Bank of India RBI ) has enabled an auto-bidding facility for investing in treasury bills (T-bills) via both the RBI retail direct website and the app. This auto-bidding facility requires a valid NACH (National Automated Clearing House) mandate for executing the T-Bills this additional facility, you can invest in T-bills by placing a conditional order that matches your requirements. It's similar to wanting to buy a stock at Rs 120 when the current market price is Rs 125. You would then put a conditional order saying that as soon as this stock's price drops to Rs 120, you will go ahead and buy RBI said: 'This facility complements the existing manual bidding option, and allows you to set investment preferences, viz., T-bill tenor, bid amount, bidding frequency and validity period, by creating Auto-bid Rules that are executed automatically once the bidding window of the respective T-bill auction becomes active on the RD portal/App.'The RBI said that you should start by adding a bank account and setting up a NACH mandate . This way, when your conditional order (auto-bidding) is activated, the funds can be withdrawn from your bank account to complete the to the RBI, key features of the facility are:Set the intended T-bill tenor, bid amount, bidding frequency, and period of rule validity. Bids will be auto-placed when the conditions are specific T-bill auction/s from the Quarterly Calendar for Auction of T-bills and specify the bid amount. The rule is to be set before the commencement of bidding of the respective auction on the RD portal/ T-bills investors, this auto-bidding feature means that they don't have to manually submit bids for T-Bills auctions. This can really cut down the time it takes to invest in T-Bills investment if the conditions of the conditional order are Bills (T-Bills) are money market instruments or short term debt instruments issued by the Government of India. At present, they are issued in three tenors -- 91 days, 182 days and 364 days. The Treasury Bills are zero coupon securities and pay no interest. Instead they are issued at a discount and redeemed at face value on example: a 91 day Treasury bill of Rs 100 (face value) may be issued at say Rs 98.2, that is, at a discount of Rs 1.9 and would be redeemed at the face value of Rs 100. The return to the investors is the difference between the maturity value or the face value (that is Rs 100) and the issue price).According to the RBI website, the day count convention is the method used to determine the holding period (in days) of a bond for calculating the accrued interest. Since using different day count conventions can lead to varying amounts of accrued interest, it is important for everyone in the market to follow a standard day count conventionFor example, the conventions followed in the Indian market are as follows:Bond market: The day count convention followed is 30/360, which means that irrespective of the actual number of days in a month, the number of days in a month is taken as 30 and the number of days in a year is taken as market: The day count convention followed is actual/365, which means that the actual number of days in a month is taken for number of days (numerator) whereas the number of days in a year is taken as 365 days. Hence, in the case of T-Bills, which are essentially money market instruments, money market convention is followed.
Economic Times
2 hours ago
- Economic Times
Retail Direct: RBI enables auto-bidding facility using NACH mandate for investing in T-Bills; Know how it will work
ET Online Retail Direct: RBI enables auto-bidding facility using NPCI NACH mandate for investing in T-Bills; Know how it will work The Reserve Bank of India (RBI) has enabled an auto-bidding facility for investing in treasury bills (T-bills) via both the RBI retail direct website and the app. This auto-bidding facility requires a valid NACH (National Automated Clearing House) mandate for executing the T-Bills order. With this additional facility, you can invest in T-bills by placing a conditional order that matches your requirements. It's similar to wanting to buy a stock at Rs 120 when the current market price is Rs 125. You would then put a conditional order saying that as soon as this stock's price drops to Rs 120, you will go ahead and buy it. The RBI said: 'This facility complements the existing manual bidding option, and allows you to set investment preferences, viz., T-bill tenor, bid amount, bidding frequency and validity period, by creating Auto-bid Rules that are executed automatically once the bidding window of the respective T-bill auction becomes active on the RD portal/App.' What are the key features of the auto-bidding facility? The RBI said that you should start by adding a bank account and setting up a NACH mandate. This way, when your conditional order (auto-bidding) is activated, the funds can be withdrawn from your bank account to complete the to the RBI, key features of the facility are: Auto-bidding is available only for T-bills and requires a valid NACH mandate. Types of Rules: 1. General Rule: Set the intended T-bill tenor, bid amount, bidding frequency, and period of rule validity. Bids will be auto-placed when the conditions are met. 2. Calendar Rule: Select specific T-bill auction/s from the Quarterly Calendar for Auction of T-bills and specify the bid amount. The rule is to be set before the commencement of bidding of the respective auction on the RD portal/App. The rules can be amended, paused or cancelled anytime. Auto-bid is funded through NACH mandate linked to your registered bank account in the Retail Direct. Sufficient balance in the registered bank account is needed for funding the Auto-bid. Email and SMS alerts are sent for Auto-bid Rule creation, amendment, cancellation, expiry, bid placement, etc. For T-bills investors, this auto-bidding feature means that they don't have to manually submit bids for T-Bills auctions. This can really cut down the time it takes to invest in T-Bills investment if the conditions of the conditional order are satisfied. Also read: Faster salary credit, SIP debit, EMI payment and more under new NACH 3.0 system by NPCI from July 2025, know more What are treasury bills? Treasury Bills (T-Bills) are money market instruments or short term debt instruments issued by the Government of India. At present, they are issued in three tenors -- 91 days, 182 days and 364 days. The Treasury Bills are zero coupon securities and pay no interest. Instead they are issued at a discount and redeemed at face value on example: a 91 day Treasury bill of Rs 100 (face value) may be issued at say Rs 98.2, that is, at a discount of Rs 1.9 and would be redeemed at the face value of Rs 100. The return to the investors is the difference between the maturity value or the face value (that is Rs 100) and the issue price). What are the day count conventions used in calculating bond yields? According to the RBI website, the day count convention is the method used to determine the holding period (in days) of a bond for calculating the accrued interest. Since using different day count conventions can lead to varying amounts of accrued interest, it is important for everyone in the market to follow a standard day count convention .For example, the conventions followed in the Indian market are as follows:Bond market: The day count convention followed is 30/360, which means that irrespective of the actual number of days in a month, the number of days in a month is taken as 30 and the number of days in a year is taken as market: The day count convention followed is actual/365, which means that the actual number of days in a month is taken for number of days (numerator) whereas the number of days in a year is taken as 365 days. Hence, in the case of T-Bills, which are essentially money market instruments, money market convention is followed.
NDTV
10 hours ago
- NDTV
ICICI Bank Made Offer To Acquire HDFC Ltd Before Reverse Merger: Ex-Chairman Deepak Parekh
New Delhi: Veteran banker and former chairman of HDFC Ltd, Deepak Parekh, has said that ICICI Bank had made an offer to take over mortgage lender HDFC Ltd but it was declined. HDFC Ltd, the parent entity of HDFC Bank, later merged with its banking subsidiary to create the country's biggest private sector lender. The merger became effective from July 1, 2023. With the reverse merger, the 44-year-old institution HDFC Ltd faded into memory lane. Interestingly, creation of HDFC Ltd was financially supported by erstwhile ICICI Ltd, the parent entity of ICICI Bank. During an interaction with ex-ICICI Bank MD and CEO Chanda Kochhar, released on YouTube, Parekh said, "I remember you talking to me said that ICICI started HDFC. 'Why don't you come back home?' That was your offer." However, Parekh said he declined the offer, saying "it won't be fair or proper with our name and the bank and all." Later eventual reverse merger with HDFC Bank, completed in July 2023, was driven mainly by regulatory pressure, he said, adding, "RBI supported us and they pushed us into it to some extent and they helped were no concessions, no relief, no time, nothing but they helped us to go through the process and get the approval." Describing the merger as good for the institution, he said, it is good for the country to have large banks. Indian banks must grow through acquisitions to become stronger in future, he added. (Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
