Nifty Bank Surges Over 650 Points After RBI Announces Key Banking Measures

The Nifty Bank index surged over 650 points on Wednesday, October 1, crossing the 55,000 mark and approaching 55,300. The rally came after the Reserve Bank of India (RBI) announced several policy measures aimed at strengthening the banking system and improving credit flow. 

Major bank stocks like ICICI Bank, HDFC Bank, and Axis Bank rose between 2% and 2.5% following the announcements. HDB Financial also gained nearly 3% after regulatory restrictions were eased.

Key Measures Announced by RBI

The RBI highlighted several initiatives to improve banking operations, risk management, and credit flow:

• Expected Credit Loss (ECL) Framework: Applicable to all banks from April 1, 2027, with a glide path till March 2031 to reduce the impact on existing books.
• Revised Basel-III Capital Norms: Effective for commercial banks, with lower risk weights proposed for certain segments like MSMEs, residential real estate, and home loans.
• Regulatory Changes: Removal of restrictions on overlap in businesses between banks and group entities, leaving decisions to bank boards.
• Risk-Based Deposit Insurance: To replace the current flat-rate premium system.

Measures to Boost Credit Flow

To support lending and improve financial activity, RBI announced additional steps:

• Enabling banks to finance acquisitions by Indian corporates.
• Removing ceilings on lending against listed debt securities.
• Increasing lending limits against shares from ₹20 lakh to ₹1 crore.
• Raising IPO financing limits from ₹10 lakh to ₹25 lakh per person.
• Withdrawing the 2016 framework that discouraged lending to specified large borrowers.
• Reducing risk weights for NBFC lending to operational, high-quality infrastructure projects.

Market Reaction and Outlook

Following these measures, Nifty Bank continued to trade with strong gains, nearing the recent swing high above 55,700. The positive market sentiment indicates that investors are confident in improved lending conditions, lower costs, and regulatory clarity.

The banking sector is expected to see better capital efficiency, higher credit flow, and a potential rise in profitability as these reforms are implemented.

Read more: RBI Holds Benchmark Interest Rate Unchanged at 5.5% for Second Consecutive Meeting.

Conclusion

RBI’s new measures have provided a strong boost to the banking sector, with Nifty Bank rallying sharply on October 1. By easing regulations and improving credit accessibility, the central bank has set the stage for a more robust and growth-oriented banking system in the coming months.  
 
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