PSU bank stocks to be impacted by CRR hike on Monday

By Sajeet Manghat/CNBC-TV18

What we are picking up from the markets is that this was expected, especially after Governor YV Reddy’s statements in New York and the Finance Minister’s aggressive statements in Parliament. Markets participants went to the extent of saying that this was expected ahead of the policy announcement.

They said that because this is a phased increase in CRR, there is a huge possibility that the Repo hike might not happen this Credit Policy. This might be the only measure, which might come in. You need to take into perspective that there has been a compromise on growth, which has been done. It has yet to be seen to what extent the government will go ahead and compromise.

From a banking sector perspective, the immediate impact would be the increase in cost of funds by 10-15 basis points. Some bankers say they might not be able to pass on this increase in rates that the hike has caused to customers and due to this there might be an impact on net interest margins. But from stock prices point of view, this is pretty much in place. We saw some of the banking stocks rallying for last three-four trading sessions. But we are not going to see a major fall on all those banking stocks come Monday because many of the banking stocks have factored in 50-basis points.

The bank stocks, which might be impacted, will be PSU banks because many of them had gone ahead and deduced their benchmark Prime Lending Rate, or PLR, and that they might come back and reverse those cut in PLRs. But private sector banks, which held on to the PLRs, might be banks that will benefit.