RBI MPC Meeting 2025: Banking Stocks Decline, Nifty Bank Sheds 366 Points After Rate Cut Announcement

RBI MPC Meeting 2025: Shares of banking sector stocks declined in early trade on April 9. The banking sector stocks tumbled following the Reserve Bank of India’s second rate cut announcement in 2025. Notably, the Nifty Bank index also shed 366 points in early trade.

Which Stocks Fell The Most

The Nifty Bank index fell nearly 1 per cent to decline to an intraday low level of 22,356.6. As many as 10 of the constituents of the index declined in early trade while two stocks traded flat with a positive bias.

Shares of Canara Bank declined the most among all constituents of the index, the stock fell nearly 2 per cent to hit an intraday low of Rs 87.76 apiece on the NSE. Other stocks which declined included Bank of Baroda, State Bank of India, Punjab National Bank and IndusInd Bank as they traded lower by as much as 1.52 per cent at the time of writing.

Shares of private sector lenders such as Axis Bank, ICICI Bank, AU Small Finance Bank, Kotak Mahindra and Federal Bank traded lower by as much as 0.70 per cent at the time of writing. HDFC Bank and IDFC Firstbank shares bucked the trend and traded higher by as much 0.06 per cent at the same time.

Why Are Bank Stocks Tumbling

The RBI repo rate cut contributed to the decline seen in banking sector stocks. Typically, a repo rate cut decreases margins for public and private sector lenders as lower interest rates mean banks earn less money on loans. On the other hand, banks also have to pay more to attract deposits when a rate cut happens which in turn squeezes the difference between what the banks earn and what they pay out to depositors.

The RBI Monetary Policy Committee meeting was held between April 7 and April 9. The repo rate has been reduced by 25 basis points to 6 per cent. Notably, this is the lowest level at which the repo rate has been kept since September 2022.

The rate cut comes at a time when the US has imposed reciprocal tariffs on all its trade partners including India. The RBI also acknowledged the impact of the tariffs in heightening uncertainty and clouding the economic outlook.

RBI Governor, Sanjay Malhotra, also said that the rate cut comes in the context of a ‘decisive improvement’ in the inflation outlook. The RBI added that inflation is likely to align with its 4 per cent target over the next 12 months.