1. Bank stocks end in red after RBI raises cash reserve ratio

Bank stocks end in red after RBI raises cash reserve ratio

Reacting to the Reserve Bank of India’s notification to maintain an incremental cash reserve ratio of 100%, stocks of major lenders ended the Monday trading session in red.

By: | Mumbai | Published: November 29, 2016 6:16 AM

Reacting to the Reserve Bank of India’s (RBI) notification to maintain an incremental cash reserve ratio (CRR) of 100%, stocks of major lenders ended the Monday trading session in red. The BSE Bankex closed at 20,939.67, down 245.39 points, or 1.16%, whereas the Sensex closed at 26,350.17, up 33.83 points, or 0.13%.

Among the public sector banks, Bank of Baroda (BoB) reported the highest intraday loss as the stock ended the session down almost 3% followed by State Bank of India (SBI) whose shares were down around 2.8%. Shares of private lender banks like IndusInd Bank, ICICI Bank and Yes Bank closed down between 1% and 2.3%.

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With the aim of absorbing the surplus deposits in the system post the demonetisation of Rs 500 and Rs 1,000 bank notes, the central bank on Saturday issued a notification asking banks to maintain an incremental cash reserve ratio (CRR) of 100% effective the fortnight ended November 26.

Expressed as a percentage of a bank’s net demand and time liabilities (NDTL) — CRR — is the amount of money parked with RBI on which banks do not earn any interest. The central bank said that the CRR remains unchanged at 4% of NDTL.

Total deposits rose from Rs 97 lakh core in the September 16 fortnight to Rs 101.1 lakh crore in the November 11 fortnight, shows RBI data.

The move will be applicable on deposits between September 16 and November 11 fortnights in order to suck out around Rs 3.24 lakh crore excess liquidity from the system.

“This is intended to absorb a part of the surplus liquidity arising from the return of specified bank notes (SBNs) to the banking system, while leaving adequate liquidity with banks to meet the credit needs of the productive sectors of the economy,” the RBI said stated in a notification.

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