Bank stocks under pressure; tank up to 9% on RBI measures
Bank stocks today took severe beatingin the stock market, falling as much as 9% in morning trade, after the RBI announced additional liquidity tightening measures to check rupee slide.
Yes Bank tanked 8.6%, while Bank of India slipped 7.61%, Canara Bank (6.39%), Axis Bank (6.13%), Kotak Mahindra Bank (5.56%). Among blue-chips, PNB tumbled 5.58%, while ICICI Bank was down 4.63%, SBI (3.81%) and HDFC Bank (3.26%).
Following the weakness in these stocks, the BSE banking index plunged 4.44% to 12,260.52 and was the top loser among the 13 sectoral indices.
With the rupee still continuing to be weak, the Reserve Bank yesterday announced additional liquidity tightening measures to contain excessive speculation and volatility in the foreign exchange market.
RBI has reduced the liquidity adjustment facility (LAF) for each bank from 1% of the total deposits to 0.5%, thus limiting the access to borrowed funds from the central bank. The limit will come into force with immediate effect and continue till further notice, the RBI has said. In another measure to suck out liquidity from the system, RBI has asked banks to maintain higher average CRR (cash reserve ratio) of 99% of the requirement on daily basis as against earlier 70%.
CRR is portion of deposits that banks are required to keep with RBI.