Bank stocks rally after RBI holds repo rate at 5.25%
The MPC, chaired by Governor Sanjay Malhotra, unanimously voted to maintain the repo rate under the liquidity adjustment facility (LAF) at 5.25%. Accordingly, the standing deposit facility (SDF) rate remains at 5.00%, while the marginal standing facility (MSF) rate and the Bank Rate continue at 5.50%. The committee also retained its ?neutral? policy stance.
The central bank flagged rising global risks, noting that the conflict in West Asia has disrupted supply chains, creating a challenging environment of higher prices and slower global growth. It added that monetary policy now faces a delicate balance between anchoring inflation and supporting growth.
On the domestic front, India?s economy remained resilient in FY26, with real GDP growth revised higher to 7.6% YoY as per the Second Advance Estimates, compared to 7.4% projected earlier in the First Advance Estimates.
However, the RBI warned that elevated energy and commodity prices, along with potential disruptions in the Strait of Hormuz, could weigh on growth going forward. Real GDP growth for FY27 is pegged at 6.9%, with quarterly projections at 6.8% in Q1, 6.7% in Q2, 7.0% in Q3 and 7.2% in Q4.
Inflation risks have also firmed up. CPI inflation for FY27 is projected at 4.6%, up sharply from 2.1% earlier, with upside risks stemming from elevated energy prices and potential weather disruptions such as El Ni?o impacting the monsoon.
The MPC noted that while headline inflation remains below target and core inflation is muted, uncertainties around supply chains and possible second-round effects warrant caution.
Given the evolving global situation and supply-side shocks, the RBI emphasised a wait-and-watch approach, highlighting that India?s economic fundamentals remain strong enough to absorb external shocks.
The MPC minutes will be released on 22 April 2026, while the next policy meeting is scheduled from 3 June 2026 to 5 June 2026.
Following the announcement, the Nifty Bank index rose 5.23% to 55,472.80, while the Nifty 50 rose 3.75% to 23,990.85. Among bank stocks, Banking stocks rallied broadly, led by AU Small Finance Bank, which surged 7.61%, followed by Union Bank of India, up 7.27%, and IndusInd Bank, which gained 6.93%. Bank of Baroda rose 6.30%, while Canara Bank advanced 6.08% and Axis Bank climbed 5.82%. IDFC First Bank added 5.75%, Punjab National Bank moved up 5.57%, and ICICI Bank gained 5.19%. HDFC Bank rose 5.03%, Yes Bank advanced 4.80%, and State Bank of India climbed 4.04%. Kotak Mahindra Bank added 3.82%, while Federal Bank ended 3.49% higher.
