NEW DELHI: After the Reserve Bank of India (RBI) hiked interest rates by 25 basis points, as expected, bank stocks were trading with a negative bias as investors were worried about the impact on credit growth and margin compression.
“This rate hike could impact credit growth, which is currently robust and recovering from the pandemic lows of 5 per cent. With private capex coming back to the fore after a gap of many years, it is up to the banks to balance the lending and deposit rates to foster conducive economic growth,” said Tejas Khoday, co-founder and CEO, FYERS.
Following RBI’s MPC announcement, Nifty was trading 0.66% higher, while Nifty Bank was trading flat.
“The rate hikes are likely to raise the EMI burden for floating rate linked loans. However, the bank’s NIMs are likely to stay stable as an increasing proportion of EBLR-linked loans,” said Ajit Kabi, banking analyst at LKP Securities.
According to the latest print on January 27, while credit growth was healthy on a YoY basis, it de-grew marginally on a fortnightly basis, probably hinting at a reluctance to borrow at higher rates.
Bank stocks have been underperforming in recent weeks with Nifty Bank cracking 3.5% so far in 2022 against Nifty stepping back by 1.3% during the period.