REC, RBL, PNB Lead Bank and NBFC Rally as RBI Injects ₹1.9 Trillion Liquidity

Banking and NBFC stocks surged on Thursday, March 6, 2025, after the Reserve Bank of India (RBI) announced measures to add nearly ₹1.9 trillion in liquidity to the banking system.

Banking Stocks Gain Amid Liquidity Boost

The Nifty PSU Bank index climbed 1.46% (86.3 points), reaching an intraday high of 5,976.75. The Nifty Bank index also rose 0.72% (349.15 points), touching 48,839.10.

Among PSU banks, notable gainers included

• Central Bank: +2.85%
• Punjab National Bank (PNB): +2.51%
• Punjab & Sind Bank: +2.71%
• Bank of Maharashtra: +2.35%
• UCO Bank: +2.82%

Other PSU banks like Bank of India, Union Bank, Indian Overseas Bank, and Canara Bank gained between 0.7% and 1.3%, while SBI and Indian Bank saw minor declines of up to 0.3%.

In the Nifty Bank index, key performers included

• Canara Bank: +2.05%
• AU Small Finance Bank: +1.99%
• Bank of Baroda: +1.69%
• Other banks like IDFC First Bank, Federal Bank, ICICI Bank, and HDFC Bank saw gains between 0.1% and 1%.

Private Banks and NBFCs Also Rally

The Nifty Private Bank index gained 0.67% (163.7 points), reaching 24,401.85, while the Nifty Financial Services index rose 0.64% (148.05 points) to 23,198.65.

Top gainers in private banks

• RBL Bank: +3%
• City Union Bank: +2%
• Bandhan Bank, Axis Bank, Federal Bank, and IDFC First Bank saw gains between 0.5% and 1%.

NBFC stocks also saw strong buying interest

• REC, Shriram Finance, LIC Housing Finance, PFC, ICICI General Insurance, Cholamandalam Investment, MCX, and Muthoot Finance gained up to 4%.

RBI’s Plan to Inject Liquidity

The RBI has announced a liquidity infusion through Open Market Operations (OMO) by purchasing government securities worth ₹1 trillion in two phases:

• ₹50,000 crore on March 12
• ₹50,000 crore on March 18

Additionally, the central bank will conduct a USD/INR buy-sell swap auction worth $10 billion with a 36-month tenor on March 24.

For the past 11 weeks, the banking system faced a liquidity deficit, though it recently narrowed to ₹20,000 crore as of Tuesday. Earlier this year, the RBI had conducted OMO auctions worth ₹60,000 crore and USD/INR swaps of $5 billion and $10 billion in January and February.

These measures are expected to support liquidity, stabilise interest rates, and boost lending activity in the banking sector.

Conclusion

The RBI’s liquidity measures are expected to ease the banking system’s cash crunch, support lending, and stabilise interest rates, driving positive sentiment in banking and NBFC stocks.

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