Banks sink 7% amid US polls woes; but analysts see strong growth

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Banks stocks fell sharply amid steep market correction on US elections jitters. Bank Nifty crashed 7 percent intraday Wednesday but analysts expect strong growth in banks going ahead, especially after the government announced measures to curb the black money.

"Banks should see stronger growth – not just in deposits, but in transaction fees as well. Interest rates should fall with increased formal money supply," Bank of America Merrill Lynch said in its research note.

It further said the government's aggressive action against the cash economy should have far reaching effects like formalisation of the shadow economy, increased tax collections, and potential reduction in corruption. It believes a consequent increase in multipliers will be good for growth medium term.

JP Morgan said these measures should be positive for the taxation and fiscal outlook of the government over the long term as the level of unaccounted money comes down in the system.

Prime Minister Narendra Modi on Tuesday evening announced a ban on Rs 500 and Rs 1000 notes, a significant step towards curbing black money and terrorism. The government will issue Rs 500 and Rs 2000 notes soon.

Banks are closed today for cash balancing and stocking up of lower denomination Rs 50 and Rs 100 notes and high security new Rs 500 and Rs 2,000 notes. All ATMs will also remain shut today as well tomorrow as banks replace the now declared invalid Rs 500 and Rs 1,000 notes with new currency papers.

"This is a significant move which can be gamechanging and bring about structural changes in the economy. It will curtail blackmoney," Chanda Kochhar, Managing Director and Chief Executive of ICICI Bank said.

"It also curtails some amount of that discretionary large spend which can have a cooling impact on inflation. There is a whole lot of positive structural impact which it will create in the economy," she said.