Thirteen bank stocks fell by 1.92% to 7.49% at 10:44 IST on BSE after the Reserve Bank of India on Tuesday, 23 July 2013 announced more measures to squeeze liquidity from the banking system to stem rupee's decline.
Yes Bank (down 7.49%), IndusInd Bank (down 6.72%), ICICI Bank (down 3.72%), Canara Bank (down 5.31%), State Bank of India (down 3.13%), Bank of Baroda (down 4.31%), Axis Bank (down 4.04%), Punjab National Bank (down 4.18%), Union Bank of India (down 4.04%), Bank of India (down 5.45%), Kotak Mahindra Bank (down 4.65%), HDFC Bank (down 1.92%) and Federal Bank (down 5.08%), edged lower.
The S&P BSE Bankex was down 3.69% at 12,356.55 and was the top loser among the sectoral indices on BSE. It underperformed the S&P BSE Sensex, which was down 0.47% at 20,206.11.
The Bankex had underperformed the market over the past one month until 23 July 2013, falling 1.06% compared with the Sensex's 8.14% rise. The index also underperformed the market in past one quarter, falling 10.58% as against 5.85% rise in the Sensex.
Bank stocks edged lower after the Reserve Bank of India (RBI) after market hours on Tuesday, 23 July 2013 announced fresh measures to squeeze liquidity from the banking system to stem rupee fall. The RBI signaled that it will stay the course with its defence of the currency despite the risks to economic growth.
The central bank tightened liquidity further and made it even harder for lenders to access funds with measures including lowering the amount banks can borrow or lend under its daily liquidity window. The RBI lowered the overall limit for borrowing under the daily liquidity adjustment facility (LAF) -- which offers funds in exchange for collateral -- for each bank to 0.5% of deposits from 1%. The central bank also said banks now needed to maintain 99% of their daily cash reserve ratio requirements -- the deposits they must set aside -- with the RBI, compared with 70% now. The change takes effect from the two-weekly period starting 27 July 2013. The RBI also announced the sale of short end cash management bills of Rs 6000 crore to drain out more cash from the banking system.
Earlier, the central bank had on 15 July 2013 announced that the Marginal Standing Facility (MSF) rate is re-calibrated with immediate effect to be 300 basis points above the policy repo rate under the Liquidity Adjustment Facility (LAF). Consequently, the MSF rate stood at 10.25%. Accordingly, the Bank Rate was also adjusted to 10.25% with immediate effect. The overall allocation of funds under the LAF was limited to 1% of the Net Demand and Time Liabilities (NDTL) of the banking system, reckoned as Rs 75000 crore for this purpose, the Reserve Bank of India (RBI) said. The allocation to individual banks would be made in proportion to their bids, subject to the overall ceiling, it said. The change in LAF came into effect from 17 July 2013.
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