Bankex falls freely on 100 per cent CRR

The banking index Bankex witnessed a free fall by over 260 points. The index has lost almost 1.24 per cent on an intraday basis on November 28 as on 1.49 pm. RBI on November 26 post market hours announced that on the increase in NDTL between September 16, 2016 and November 11, 2016, scheduled banks shall maintain an incremental CRR of 100 per cent, effective from the fortnight beginning November 26, 2016. This is intended to absorb a part of the surplus liquidity arising from the return of SBNs to the banking system, while leaving adequate liquidity with banks to meet the credit needs of the productive sectors of the economy.

As the incremental CRR is intended to be a temporary measure within the Reserve Bank’s liquidity management framework to drain excess liquidity in the system, it will be reviewed on December 9, 2016 or even earlier. The markets took this news negatively and that was the real reason behind the downfall of banking scrips.  The shares of Bank of Baroda, SBI, PNB, IndusInd Bank, ICICI Bank, Federal Bank and Yes Bank have fallen in a range of 3 to 0.01 per cent. Axis Bank is the scrip in the Bankex which is trading positive, with a gain of 0.57 per cent as on 13.55 pm.