On 28 January 2025, the Reserve Bank of India (RBI) took three major steps to overcome the cash crisis in the banking system, after which the Nifty Bank and Nifty Financial Services saw a strong lead of up to 2.1%. The RBI announced that they would add cash worth about Rs 1.5 lakh crore to the banking system. This decision filled the market excited. Dr. VK Vijaykumar, who is the main investment strategist of Giosit Financial Services, said, “This move of RBI will increase cash in the banking system, and it is positive for the market. This has also increased the expectation of interest rates from India’s Monetary Policy Committee (MPC) in February. This can benefit banks. ”
Special lead in Nifty Bank
At around 11:37 AM in the morning, there was a tremendous bounce in the stocks of big banks of the Nifty Bank Index. HDFC Bank and Axis Bank shares increased by 3%. At the same time, shares of IDFC First Bank, ICICI Bank, and AU Small Finance Bank also climbed more than 2%. Apart from this, the shares of Bank of Baroda and IndusInd Bank also rose by more than 1%. In this way, 8 stocks of Nifty Bank saw an increase and 4 declines.
The Nifty Financial Services Index also saw a big lead. Cholamandalam Investment and Finance shares climbed above 4%, while Bajaj Finserv and Shriram Finance also increased by more than 1%.
Impact of RBI measures
The RBI on Monday announced to buy government securities worth Rs 60,000 crore under Open Market Operations (OMO). The purchase will be held in three phases, on 30 January, 13 February and 20 February.
In addition, the RBI will auction a 56 -day variable rate reverse repo on February 7, with an amount of Rs 50,000 crore. This will keep cash in the banking system by the end of the year. These funds will return to the monetary policy review to be held in April.
And yes, RBI has also announced a $ 5 billion-rupa swap auction, which will be on 31 January. This will bring about Rs 50,000 crore cash in the banking system. However, it may affect forward premium in the foreign exchange market, but it will not have much impact on the spot rates.
Will rates be cut in the coming times?
These steps of RBI will bring main cash of about Rs 1 lakh crore in the banking system and additional cash of Rs 50,000 crore. According to Rajiv Radhakrishnan, Cio – Fixed Income, SBI Mutual Fund, “These steps will directly and permanently on the market. However, the decision to cut interest rates can be avoided for a short time, until we find out external conditions and domestic development, inflation and better balance of cash. ”