 "Photo: Bloomberg")
Bank stocks saw a sharp surge in noon deals on Friday after the Reserve Bank of India announced that it will discontinue the implementation of incremental-cash reserve ratio (I-CRR) in a phased manner.
"On a review, it has been decided to discontinue the I-CRR in a phased manner. Based on an assessment of current and evolving liquidity conditions, it has been decided that the amounts impounded under the I-CRR would be released in stages so that system liquidity is not subjected to sudden shocks, and money markets function in an orderly manner," the RBI said in a statement on Friday, September 8. READ HERE
At 2:30 PM, the Nifty Bank index was ruling 1 per cent higher on the National Stock Exchange (NSE) as against a 0.66 per cent gain in the benchmark Nifty50 index.
Among individual stocks, Bandhan Bank quoted 3 per cent higher, Federal Bank 2 per cent, and Bank of Baroda, State Bank of India (SBI), IndusInd Bank, AU Small Finance Bank, and HDFC Bank 1 per cent each.
The Nifty Private Bank and PSU Bank indices were up 1 per cent each as well.
Also Read
As per the schedule, the RBI will release 25 per cent of the amount received under I-CRR on September 9, next 25 per cent on September 23, and the remaining 50 per cent on October 7.
During the August review of the monetary policy, the RBI mandated scheduled banks to maintain an additional 10 per cent CRR on the increase in their net demand and time liabilities between May 19, 2023 and July 28, 2023. The I-CRR mandate came into effect from August 12.
According to the RBI's state of the economy report, some recent developments, including the return of Rs 2,000 banknotes overwhelmingly in the form of deposits, had expanded liquidity disproportionately, causing some dissonance with the disinflationary stance of monetary policy, while impeding transmission of policy impulses across the term structure of interest rates.
The intent of the I-CRR mandate was to return the impounded funds ahead of advance tax outflows from the banking system, and well before the pick-up in demand for bank credit that typically characterised the second half of the year.
