Mumbai: Bank stocks fell after RBI’s monetary policy committee unanimously voted for a pause on rate cut, though it has come after five consecutive rate cuts since February 2019.
The bond market reacted as the 10-year government bond yield spiked to 6.82 per cent levels, meaning mark-to-market losses for the banks.
The yield on the 10-year government bond shot up by 10 basis points (bps). The yields had fallen by around 20 bps in the last two months.
The Nifty Bank Index fell 0.83 per cent while Nifty PSU Bank Index fell 1.80 per cent.
The top losers included IndusInd Bank (-2.30 per cent), PNB (-2.27 per cent), RBL Bank (-2.21 per cent), SBI (-1.71 per cent), Yes Bank (-1.67 per cent), Axis Bank (-1.60 per cent), Bank of Baroda (-1.54 per cent), Federal Bank (-1.08 per cent), HDFC Bank (-0.54 per cent) and ICICI Bank (-0.34 per cent).
The public sector banks fell sharply, led by Canara Bank (-3.01 per cent), Union Bank (-2.76 per cent), J&K Bank (-2.32 per cent), Oriental Bank (-2.17 per cent) and Indian Bank (-1.87 per cent).
While the rate cuts have been significant, with cumulative rate cuts of 135 basis points since February 2019, concern remains about the slow transmission of rate cuts by the banks to the end consumer, analysts said.
With the banks now under pressure to pass on lower interest benefit to end-consumers without further repo rate cut, their margins could get impacted in the coming quarter.
Ravikant Bhat, Senior Analyst-BFSI, India-Nivesh said, “RBI MPC surprised with a unanimous preference for status quo on policy rates, despite observing there was room for a rate cut, due to, as the Governor stated, slow transmission of earlier rate cuts. The onus clearly shifts to banks.”