Banking stocks rally as RBI cuts marginal standing facility

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 Banking stocks rally as RBI cuts marginal standing facility
YES Bank: Quotes, News
BSE 1308.80BSE Quote16.95 (1.30%)
NSE 1308.80NSE Quote17.25 (1.32%)
ICICI Bank: Quotes, News
BSE 277.50BSE Quote12.5 (4.50%)
NSE 277.60NSE Quote12.55 (4.52%)
Banking stocks staged a smart rally in trade today as the Reserve Bank of India (RBI) cut the Marginal Standing Facility (MSF) for banks.

Banking stocks that rallied in trade today were Yes Bank which gained 7 per cent, while other notable gainers were Union Bank which rallied 3 per cent, while Kotak Mahindra also gained 3% and IndusInd Bank was up 4%.

In yet another surprising move after the monetary policy review, the Reserve Bank of India (RBI) on Monday announced fresh measures to ease the liquidity conditions in India, partially rolling back the measures taken in the month of July to stem rupee's slide.

The central bank eased the short term borrowing costs for banks by slashing the marginal standing facility (MSF) rate by 50 basis points from 9.5 per cent to 9 per cent.

In the latest monetary policy review, RBI had reduced the MSF by 75 basis points from 10.25 per cent to 9.5 per cent.

The RBI also said it has decided to provide additional liquidity through term repos of 7-day and 14-day tenor for a notified amount equivalent to 0.25 per cent of net demand and time liabilities (NDTL) of the banking system through variable rate auctions on every Friday beginning October 11, 2013.

The notified amount and tenor of the term repo auctions will be announced prior to the dates of the auctions, said RBI in a statement. On Monday, the RBI also infused Rs 9,974 crore through open market operations (OMOs) to inject liquidity in the system.

Meanwhile, in line with the reduction in MSF rate, the Bank Rate also stands adjusted to 9.0 per cent with immediate effect, said RBI. with inputs from Dion Global Solutions

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