Bank Nifty fell nearly 500 points on Monday with SBI, ICICI Bank and Axis Bank among the leading losers, as the Reserve Bank of India's (RBI) latest liquidity-tightening measures and a sharp rise in government bond yields weighed on sentiment towards banking stocks.
The Nifty Bank index declined 488 points, or 0.88 percent, to 54,768.60 in morning trade, reversing early gains after opening at 55,350.15 and touching an intraday high of 55,416.45. The decline came even as the rupee appreciated nearly 1 percent against the US dollar following the central bank's weekend announcements.
The RBI announced plans to sell Rs 25,000 crore worth of government bonds on Tuesday, a move that would directly absorb liquidity from the banking system. It also raised the minimum daily maintenance requirement for banks' cash reserve ratio (CRR) to 99 percent from 90 percent, effective October 16, restricting banks' flexibility in managing their reserve balances.
The measures come alongside the RBI's efforts to support the rupee, including a special dollar window for three state-run oil-marketing companies. Foreign exchange operations could also indirectly drain rupee liquidity, adding to concerns over banking-system liquidity.
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