Financial stocks trade lower post RBI’s rate cut: Bank of India, Union Bank of India, IOB down over 1%

All the banking stocks were trading lower despite the Reserve Bank of India (RBI) cutting the repo rate by 0.25 basis points to 6%.

The Nifty PSU Bank sector slipped 1.52%, with Bank of India, Union Bank of India, Indian Bank, Central Bank of India and Bank of Baroda being the top losers, declining as much as 2.97%.

Canara Bank (-1.34%), State Bank of India (-1.29%), Punjab National Bank (1.12%), Indian Overseas Bank (-0.89%) and UCO Bank (-0.21%) were also trading lower.

However, Punjab and Sind Bank (0.26%) and Bank of Maharashtra (0.27%) edged higher.

The Nifty Private Bank sector also fell 0.58%, with Bandhan Bank being the biggest laggard, tanking 2.47%.

ICICI Bank, RBL Bank, Yes Bank, Axis Bank and IndusInd Bank were the top losing scrips in the sector, declining as much as 1%.

The RBI governor Sanjay Malhotra, while announcing the policy decision, also said that the monetary stance has been changed to 'accommodative' from 'neutral'.

Citing uncertainties amid an ongoing trade war, the governor announced that the central bank has lowered India's GDP growth projection for FY26 to 6.5% from an earlier estimate of 6.7%.

The central bank has projected 6.5% growth in Q1, 6.7% in Q2, 6.6% in Q3, and 6.3% in Q4.

On the positive front, RBI lowered the FY26 inflation projection to 4% from 4.2% projected earlier.

The governor added that uncertainties about Rabi crops have abated considerably, and the second advance estimates point to record wheat production.

On the liquidity front, the governor added that system liquidity was in deficit in January. But, as a result of a slew of measures, it tapered during February and March and has now turned into a surplus.

“To ease liquidity conditions, the cash reserve ratio (CRR) of banks was reduced by 50 basis points to 4% of net demand and time liabilities (NDTL) in December 2024, restoring the CRR to its pre-pandemic level while releasing primary liquidity to the tune of ₹1.16 lakh crore to the banking system,” the policy report said.

Share of NBFCs like Bajaj Finance (-2.04%), Shriram Finance (-3.17%), Bajaj Finserv (1.20%), Cholamandalam Investment (-4.98%), Jio Financial Services (-2.59%), Muthoot Finance (-10%) also tanked following the announcement.