Banks and non-banking financial company (NBFC) stocks rose on Friday after the Reserve Bank of India (RBI) announced liquidity boosting measures. The Reserve Bank of India kept the repo rate unchanged at 4 percent and maintained an accommodative stance.
The central bank, in today's policy, decided to extend the scheme for co-origination of loans by banks and a category of NBFCs to all NBFCs, including HFCs, in respect of all eligible priority sector loans, This will allow greater operational flexibility to the lending institutions.
Not just that, the RBI has also decided to rationalise the risk weights applicable to individual housing loans, based on the size of the loan as well as the loan-to-value ratio (LTV), and link them to LTV ratios only for all new housing loans sanctioned up to March 31, 2022.
Following the policy announcement, the Nifty Fin Services index surged 2.2 percent while Nifty Bank also rose 2 percent. In comparison, the benchmark Nifty was up over half a percent.
NBFCs and HFCs including LIC Housing Finance, Mahindra & Mahindra Financial Services, Indiabulls Housing Finance, PNB Housing Finance, and HDFC rose between 4 percent to 9 percent while banking stocks, ICICI Bank, Bandhan Bank, RBL Bank, HDFC Bank, and Axis Bank also gained over 1.5 percent each.
The term RTGS refers to a funds transfer system that allows for the instantaneous transfer of money and/or securities. RGTS is the continuous process of settling payments on an individual order basis without netting debits with credits across the books of a central bank.
Further, RBI in its first official estimate said that it expects GDP to contract by 9.5 percent in FY21. In a statement after the meeting of the Monetary Policy Committee, RBI Governor Shaktikanta Das said the Indian economy is entering into a decisive phase in the fight against coronavirus.
"The contraction in economic growth witnessed in the April-June quarter of the fiscal is behind us and silver linings are visible," Das said.
According to him, inflation too is likely to ease to the target level in the fourth quarter of 2020-21. The retail inflation (CPI), which the RBI factors in its monetary policy, has remained above 6 percent in recent months.
(Edited by : Ajay Vaishnav)
First Published: IST