Banking stocks crash on CRR, LAF measures

Business

oi-Sunil

By Sunil Fernandes

Published: Wednesday, July 24, 2013, 9:50 [IST]

Banking stocks crashed once again as the RBI announced fresh measures to battle the falling rupee. Axis Bank was down 4.69 per cent in trade, while IndusInd Bank dropped 6.89 per cent and Yes bank slumped 6.6 per cent.

PSU banking stocks saw damage to a lesser extent with notable losers from the space being State Bank of India, Bank of Baroda, Union Bank of India and Punjab National Bank.

Late on Tuesday the The Reserve Bank of India (RBI) in its bid to fight the falling rupee has squeezed liquidity again by announcing a fresh set of measures.

The RBI cut the money it lends to banks under the liquidity adjustment facility (LAF) to 0.5 per cent of the deposits of a bank. This is as against 1% or Rs 75,000 crores available for the entire banking system.

"The overall limit for access to LAF by each individual bank is set at 0.5 per cent of its own NDTL outstanding as on the last Friday of the second preceding fortnight. This measure will come into effect immediately, i.e., from July 24, 2013 and will remain in force until further notice," the RBI has said in a release.

Currently, banks are allowed to maintain their Cash Reserve Ratio (CRR) prescribed by the RBI on an average daily basis during a reporting fortnight, with a minimum of 70 per cent of the required CRR on a daily basis. Effective from the first day of the next reporting fortnight i.e., from July 27, 2013, banks will be required to maintain a minimum daily CRR balance of 99 per cent of the requirement.

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