Banking shares have rallied up to 8% after the Reserve Bank of India (RBI) cut the cash reserve ratio (CRR) by 25 basis points to 4.50% from 4.75%, which can help banks trim base rates.
One basis point is equal to one percentage point. CRR is the proportion of deposits that banks need to keep with RBI as cash.
Consequently, around Rs 17,000 crore of primary liquidity will be injected into the banking system, the RBI said in its mid-quarter monetary policy review.
However, the policy repo rate and the reverse repo rate remained unchanged at 8% and 7% respectively, the RBI said.
The National Stock Exchange (NSE), Bank Nifty has surged 2.29% as compared to less than 1% gain in benchmark Nifty at 1108 hours.
Among the individual stocks, Oriental Bank of Commerce, Indian Bank, Allahabad Bank, Andhra Bank, Canara Bank and Yes Bank have surged more than 5% each. ICICI Bank, State Bank of India (SBI), Union Bank of India, Bank of Baroda and Punjab National Bank are up 3-4% each on the NSE.
