Banking stocks lead market rally post RBI Monetary Policy, what's the trigger?
Axis Bank, Kotak Bank Axis Bank, ICICI Bank, HDFC Bank and YES Bank shares rose up to 2.52% after the RBI monetary policy, respectively.
- Oct 1, 2025,
- Updated Oct 1, 2025 2:28 PM IST
Banking stocks were among the top gainers today after Reserve Bank of India announced a slew of measures aimed at increasing the competitiveness of the Indian banking sector. The BSE bankex zoomed over 905 points to 62 419 and Bank Nifty gained 743 points to 55,379.
Axis Bank, Kotak Bank Axis Bank, ICICI Bank, HDFC Bank and YES Bank shares rose up to 2.52% after the RBI monetary policy, respectively.
The Reserve Bank of India (RBI) announced an increase in the maximum ceiling an individual can borrow by keeping shares as collateral from Rs 20 lakh to Rs 1 crore. This move was the key factor behind the rally in banking stocks today.
AR Ramachandran, SEBI registered Independent analyst said, "The announcement is beneficial for the banking sector stocks from a short term perspective as it allows banks to improve their NIMs by a few percentage points."
Another market expert Abhinav Tiwari, Research Analyst at Bonanza said that banks are set to gain the most from this change. The higher loan potential opens up new lending opportunities, driving both fee income and interest earnings. Since these loans are backed by liquid securities, banks also benefit from relatively safer, asset backed credit growth.
The apex bank also proposed that lenders will move from the current flat-rate deposit insurance premium to a risk-based system. Under this, better-rated banks pay lower premiums. According to RBI, this will incentivise sound risk management and strengthen overall financial stability.
Another proposal by the RBI is applying the Expected Credit Loss (ECL) provisioning framework with prudential floors to all scheduled commercial banks (excluding Small Finance Banks, Payment Banks, and Regional Rural Banks) and All India Financial Institutions (AIFIs) from April 1, 2027. The glide arasing from this till March 31, 2031, will enable the lenders to manage any one-time impact from higher provisioning on existing loans.
The banking regulator said its also plans to implement revised Basel III capital adequacy norms for commercial banks from April 2027. A draft on the standardised approach for credit Risk will be issued soon. Under the proposed norms, the lenders will have lower risk weights for certain sectors such as MSMEs and residential real estate including home loans. This will help reduce overall capital requirements.
The central bank also announced norms on forms of business and prudential regulation for investments after public consultations. The proposed restriction on overlap in business between a bank and its group entities does not exists anymore, leaving strategic allocation of business streams to bank boards.
“These measures align our regulatory framework with international standards, adapted to India’s national priorities, and strengthen capital adequacy for banks and financial institutions,” the RBI said.
The announcements were made amid decisions of the three-day Monetary Policy Committee meeting today. The RBI panel kept the repo rate unchanged at 5.5% and retained a neutral stance. Meanwhile, Sensex rose 608 points to 80,875 and Nifty gained 175 points to 24,785 in late morning deals on Wednesday.
Banking stocks were among the top gainers today after Reserve Bank of India announced a slew of measures aimed at increasing the competitiveness of the Indian banking sector. The BSE bankex zoomed over 905 points to 62 419 and Bank Nifty gained 743 points to 55,379.
Axis Bank, Kotak Bank Axis Bank, ICICI Bank, HDFC Bank and YES Bank shares rose up to 2.52% after the RBI monetary policy, respectively.
The Reserve Bank of India (RBI) announced an increase in the maximum ceiling an individual can borrow by keeping shares as collateral from Rs 20 lakh to Rs 1 crore. This move was the key factor behind the rally in banking stocks today.
AR Ramachandran, SEBI registered Independent analyst said, "The announcement is beneficial for the banking sector stocks from a short term perspective as it allows banks to improve their NIMs by a few percentage points."
Another market expert Abhinav Tiwari, Research Analyst at Bonanza said that banks are set to gain the most from this change. The higher loan potential opens up new lending opportunities, driving both fee income and interest earnings. Since these loans are backed by liquid securities, banks also benefit from relatively safer, asset backed credit growth.
The apex bank also proposed that lenders will move from the current flat-rate deposit insurance premium to a risk-based system. Under this, better-rated banks pay lower premiums. According to RBI, this will incentivise sound risk management and strengthen overall financial stability.
Another proposal by the RBI is applying the Expected Credit Loss (ECL) provisioning framework with prudential floors to all scheduled commercial banks (excluding Small Finance Banks, Payment Banks, and Regional Rural Banks) and All India Financial Institutions (AIFIs) from April 1, 2027. The glide arasing from this till March 31, 2031, will enable the lenders to manage any one-time impact from higher provisioning on existing loans.
The banking regulator said its also plans to implement revised Basel III capital adequacy norms for commercial banks from April 2027. A draft on the standardised approach for credit Risk will be issued soon. Under the proposed norms, the lenders will have lower risk weights for certain sectors such as MSMEs and residential real estate including home loans. This will help reduce overall capital requirements.
The central bank also announced norms on forms of business and prudential regulation for investments after public consultations. The proposed restriction on overlap in business between a bank and its group entities does not exists anymore, leaving strategic allocation of business streams to bank boards.
“These measures align our regulatory framework with international standards, adapted to India’s national priorities, and strengthen capital adequacy for banks and financial institutions,” the RBI said.
The announcements were made amid decisions of the three-day Monetary Policy Committee meeting today. The RBI panel kept the repo rate unchanged at 5.5% and retained a neutral stance. Meanwhile, Sensex rose 608 points to 80,875 and Nifty gained 175 points to 24,785 in late morning deals on Wednesday.