RBI’s 25 bps Cut Hits Bank Stocks—Find Out Which Banks Fell the Most!

The Reserve Bank of India (RBI) has reduced its key interest rate, the repo rate, by 25 basis points (0.25%), bringing it down to 6%. This decision was made during the 54th Monetary Policy Committee (MPC) meeting held from April 7 to 9, 2025, led by RBI Governor Sanjay Malhotra.

Following this change:

• The Standing Deposit Facility (SDF) rate is now 5.75%.
• The Marginal Standing Facility (MSF) rate and the Bank Rate are both 6.25%.

Why the Cut?

The RBI aims to bring inflation closer to its target of 4% while still supporting economic growth. The committee also changed its policy stance from neutral to accommodative, meaning it’s now more open to taking steps to boost the economy.

However, the RBI warned that global uncertainties and volatility remain high, and it will closely monitor how things develop.

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Growth and Inflation Outlook:

• GDP Growth for FY26 is now expected to be 6.5%, slightly lower than the earlier forecast of 6.7%.
  • Q1: 6.5%
  • Q2: 6.7%
  • Q3: 6.6%
  • Q4: 6.3%
• Inflation is expected to ease:
  • FY26 CPI inflation forecast: 4% (earlier it was 4.2%)
    • Q1: 3.6%
    • Q2: 3.9%
    • Q3: 3.8%
    • Q4: 4.4%

The RBI noted a sharp drop in food inflation, giving it more confidence that overall inflation will stay within its target range.

The minutes of the MPC meeting will be released on April 23, 2025, and the next meeting is scheduled for June 4 to 6, 2025.

Market Reaction:

After the announcement, bank stocks dropped:

• Nifty Bank index fell 0.23% to 50,394.70
• Nifty 50 index declined 0.44% to 22,436.90

Biggest Decliners:

• Bank of Baroda: ↓ 2.05%
• Canara Bank: ↓ 1.78%
• Punjab National Bank: ↓ 1.68%
• State Bank of India: ↓ 1.51%
• Axis Bank, Federal Bank, ICICI Bank: ↓ 0.81% to 0.93%
• IndusInd Bank: ↓ 0.60%
• HDFC Bank: ↓ 0.35%
• AU Small Finance Bank: ↓ 0.05%

Gainers:

Only two banks saw gains:

• Kotak Mahindra Bank: ↑ 0.18%
• IDFC First Bank: ↑ 0.09%

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In simple terms, RBI cut interest rates to help the economy and keep inflation in control, but investors reacted cautiously, causing bank stocks to slip.