New Delhi: Banking stocks surged on Friday morning after Reserve Bank of India (RBI) governor Shaktikanta Das announced a cut of 75 basis points in the benchmark repo rate in order to infuse liquidity in the system as the economy got battered due to the coronavirus epidemic.
The Bank Nifty shot up 7% at 10:28 am after the RBI presser. Among the banking stocks, Axis Bank and IndusInd Bank shares were the top gainers, climbing 14% and 10%, respectively. Among others, Bandhan Bank was up a massive 19%, IDFC First Bank 9%, HDFC Bank 6.2%, State Bank of India (SBI) 7.6%, Kotak Mahindra Bank 4.4%, Punjab National Bank 4.5% and ICICI Bank 5%.
The monetary policy committee (MPC) voted in the ration of 4:2 to reduce policy repo rate by 75 bps to 4.4%. The reverse repo rate, meanwhile, was cut by 90 basis points to 4%.
“The MPC voted for a sizable reduction in repo rate and maintaining accommodative stance. There were some differences in the quantum of reduction and MPC voted by 4:2 majority to reduce policy repo rate by 75 bps to 4.4%,” Das said in a live address via live stream.
The RBI governor added that cut in reverse repo rate was more so that banks are “incentivised to lend” and “disincentivised to hoard money”.
The cash reserve ratio (CRR) was also cut by 100 basis points to 3%, said Shaktikanta Das. Additionally, all banks and lending institutions may allow a three-month moratorium on all loans extended.
The MPC met from 24-27 March instead of the first week of April as scheduled earlier. The policy was originally to be announced on 3 April.
The RBI chief’s press conference comes after Finance Minister Nirmala Sitharaman announced a Rs 1.07 lakh crore relief package for the poor on Thursday.