SBI, IndusInd, PNB, ICICI, YES Bank shares: Why Nifty Bank stocks are falling today; targets -

Ten out of 10 Nifty Bank shares fell in Monday's trade, led by State Bank of India (SBI), ICICI Bank Ltd, Punjab National Bank, Union Bank of India, IndusInd Bank Ltd and YES Bank Ltd as the RBI raised daily cash reserve ratio(CRR) maintenance requirement for banks to 99 per cent from October 16.

Jefferies, for now, sees some impact on net interest margin (NIM), though it said the same can be passed on to borrowers. On an average, banks maintain 10 per cent of buffer above the required threshold of 90 per cent of CRR, the global investment bank noted.

Following the development, SBI fell 1.77 pr cent to Rs 942.10. PNB shares were quoting 1.35 per cent lower at Rs 115.40. ICICI Bank declined 1.34 per cen to Rs 1,336.90.

Union Bank and IndusInd Bank slipped 1.2-1.3 per cent. Canara Bank, AU Small Finance Bank (AU SFB) and YES Bank also dropped over 1 per cent each. Axis Bank, HDFC Bank and Kotak Mahindra Bank fell up to 0.8 per cent. In line with the change in MPC stance to ‘calibrated tightening’, RBI raised daily CRR from 90 per cent to 99 per cent, Jefferies noted on Monday, noting that banks would be required to fully meet full CRR norm of 3 per cent of NDTL.

"At 100 per cent CRR, banks would carry Rs 8 lakh crore in CRR & if this lifts balances by 5-10 per cent, it can withdraw Rs 40,000-80,000 crore of liquidity & add 1-2bps to cost of funds. It's a small dilution of NIMs & banks may be able to pass to borrowers. In a rising rate period, we prefer banks over NBFCs," Jefferies said.

The global investment bank maintained 'Buy' on all eight private lenders under its coverage. They included HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra bank, IndusInd Bank, IDFC First Bank, Bandhan Bank and AU Small Finance Bank. Among three PSU banks under its coverage, Jefferies has 'Hold' on Bank of Baroda but 'Buy' on SBI and PNB.

Target prices for banks: Stocks to buy