Bank stocks witness selling, down up to 3%

Bank stocks faced selling pressure today, falling up to 3 per cent, after Reserve Bank said it will soon announce new methodology for determining base rates.
Shares of Punjab National Bank fell by 3.06 per cent, Federal Bank was down 2.63 per cent and Bank of Baroda lost 2.06 per cent on BSE.
Similarly, the stock of State Bank of India declined by 1.83 per cent, Yes Bank went down by 1.38 per cent, ICICI Bank slipped 1.21 per cent, Kotak Mahindra Bank (1.19 per cent), HDFC Bank (0.58 per cent) and AXIS Bank (0.53 per cent).
The BSE bank index fell by 1.03 per cent to end at 19,654.24.

After goading banks, without much success, to pass on full benefits of policy rate cuts to borrowers, Governor Raghuram Rajan yesterday said RBI will this week issue guidelines to determine base rates on a new methodology based on the marginal cost of funds.
"Since the rate reduction cycle that commenced in January, less than half of the cumulative policy repo rate reduction of 125 bps has been transmitted by banks. The median base lending rate has declined only by 60 bps since then," he said in the 5th bimonthly monetary policy review in the current fiscal.
Explaining the rationale of the move, Rajan during the customary post-policy press meet yesterday said that "there is a particular way to calculate the base rate now. And our worry is that it should not come in the way of banks to pass through lower lending rates to customers.

"That is why we took a relook at the base rate and are coming to the marginal cost pricing which we will be announced later this week.