Public sector banks were among the top losers, with Bank of India, Union Bank of India, Indian Bank, and Bank of Baroda falling nearly 4%. Canara Bank, Punjab National Bank, and State Bank of India also dropped between 1.5% and 2%.
Among private banks, Bandhan Bank, RBL Bank, YES Bank, and ICICI Bank slipped between 1% and 3.5%.
While rate cuts are generally seen as positive for the sector, analysts flagged concerns over near-term margin pressure and slower benefit transmission. “The transmission on the cost of funds side is expected to be slower compared to the pace of transmission on loan yields,” said Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS.
He added, “With inflation cooling off, the RBI has revised its FY26 inflation forecast to 4% from 4.2%. However, amidst global challenges, GDP growth has also been tweaked downward to 6.5% from 6.7%.”
Muted CASA growth and a tight liquidity environment in Q4 may also weigh on banks’ profitability in the near term.Also Read: Sensex falls 400 pts, Nifty below 22,400 as caution reigns on D-St ahead of RBI MPC outcome, escalating US-China friction
Gold Loan NBFCs
Shares of gold loan providers fell sharply after RBI Governor Sanjay Malhotra announced plans to issue comprehensive guidelines on gold loans. Muthoot Finance and IIFL Finance declined as much as 5% on Wednesday.
“Loans against the collateral of gold jewellery and ornaments are extended by banks and NBFCs. To harmonise regulations across entities and address differential risk-bearing capabilities, we will issue comprehensive regulations on provisioning norms and conduct aspects for such loans,” Malhotra said.
Gold loans account for 98% of Muthoot Finance’s assets under management (AUM), while the figure stands at 50% for Manappuram Finance and 21% for IIFL Finance.
Housing Finance Stocks
Housing finance companies also saw selling pressure, with PNB Housing Finance, Aavas Financiers, and LIC Housing Finance dropping between 2% and 3.5%.
Adhil Shetty, CEO of Bankbazaar.com, says, “The Reserve Bank of India has reduced the repo rate by 25 basis points, bringing it down to 6%, as part of its ongoing efforts to stimulate consumption and accelerate economic growth. Lowering the policy rate is aimed at making borrowing more attractive, which could lead to increased investment in real estate and a boost in housing demand. However, the impact of this rate cut will depend significantly on the speed and efficiency with which commercial banks transmit the benefits to borrowers. A faster and more effective rate transmission is critical to achieving the intended outcomes.”
