Thirteen banks rose by 0.75% to 2.54% at 11:27 IST on BSE after the central bank left key interest rates and cash reserve ratio unchanged after its first quarter review of the Monetary Policy 2013-14 today, 30 July 2013.
Axis Bank (up 2.54%), Yes Bank (up 2.28%), Kotak Mahindra Bank (up 1.65%), Canara Bank (up 1.31%), ICICI Bank (up 1.13%), Bank of India (up 1.05%), Federal Bank (up 1.02%), Punjab National Bank (up 1.02%), State Bank of India (up 1%), Bank of Baroda (up 0.99%), Union Bank of India (up 0.99%), IndusInd Bank (up 0.86%) and IDBI Bank (up 0.75%), edged higher.
The S&P BSE Bankex was up 0.01% at 11807.44. It outperformed the S&P BSE Sensex, which was down 0.14% at 19,565.69.
The Bankex had underperformed the market over the past one month till 29 July 2013, sliding 10.94% compared with the Sensex's 1.02% rise. The index had underperformed the market in past one quarter, falling 18.07% as against Sensex's 1.06% rise.
The Reserve Bank of India (RBI) decided to keep the repo rate under the liquidity adjustment facility (LAF) unchanged at 7.25%. The reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, stands at 6.25%.
The cash reserve ratio (CRR) of scheduled banks has been retained at 4% of their net demand and time liabilities (NDTL).
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RBI stated that the monetary policy stance over the last two years has predominantly been shaped by the growth-inflation dynamic even as external sector concerns have had a growing influence on policy calibration over the last one year. The current situation - moderating wholesale price inflation, prospects of softening of food inflation consequent on a robust monsoon and decelerating growth - would have provided a reasonable case for continuing on the easing stance. However, India is currently caught in a classic 'impossible trinity' trilemma whereby RBI has to forfeit some monetary policy discretion to address external sector concerns.
It added that the recent liquidity tightening measures by RBI are aimed at checking undue volatility in the foreign exchange market and will be rolled back in a calibrated manner as stability is restored to the foreign exchange market, enabling monetary policy to revert to supporting growth with continuing vigil on inflation. It should be emphasised that the time available now should be used with alacrity to institute structural measures to bring the current-account deficit (CAD) down to sustainable levels. RBI said it stands ready to use all available instruments and measures at its command to respond proactively and swiftly to any adverse development.
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