On Monday, October 12, banking stocks such as State Bank of India, ICICI Bank, HDFC Bank, Punjab National Bank and IndusInd Bank fell, dragging the Nifty Bank index down about 1%. Investors reacted to the Reserve Bank of India’s latest liquidity‑curbing measures announced over the weekend, which include a higher daily cash reserve ratio (CRR) and an upcoming open‑market sale of government bonds. The sectoral benchmark fell to an intraday low of 54,709.05 points from 55,256.65 points at the previous close, before recovering slightly to trade 0.83% lower at around 54,797 points by noon.

The RBI announced that banks will now need to maintain 99% of the required CRR every day, effective from October 16, 2026, a rise from the current 90% level. This move is aimed at further containing liquidity in the banking system amid elevated inflation concerns. The higher CRR mandate will reduce banks’ daily flexibility to invest or lend, as they must hold more funds with the RBI, thereby tightening the liquidity scenario.

In addition to the CRR hike, the RBI plans an open‑market sale of ₹25,000 crore of government bonds on October 13. The sale will be conducted through a multi‑security auction using the multiple price method, with results announced the same day. Analysts from JP Morgan expect this operation to remove an additional ₹50,000 crore of durable liquidity from the system, tightening money‑market rates toward the policy rate.

The RBI also opened a special window for public sector oil marketing companies (OMCs) to meet their entire daily dollar needs directly from the central bank. This measure is intended to steer energy importers away from the spot currency market, thereby reducing pressure on the Indian rupee. CLSA analysts predict that these actions should support the INR near term, possibly pushing it toward 95.83 US$, with further hardening of the 10‑year yield and lower FX reserves.

During the session, the top laggards included State Bank of India at an intraday low of ₹938.10 (-2.1%), ICICI Bank at ₹1,334.50 (-1.5%), Punjab National Bank at ₹114.76 (-1.8%), Union Bank of India at ₹170.31 (-1.5%) and IndusInd Bank at ₹849.25 (-1.4%). Axis Bank and Canara Bank also fell by 1.1% and 1.5% respectively, while HDFC Bank dipped only 0.3% to ₹704.50. These figures were sourced from the NSE website as of the trading session on October 12.

Analysts from Jefferies noted that the RBI’s shift to a ‘calibrated tightening’ stance aligns with the higher CRR, which would lift banks’ CRR balances by 5‑10%, potentially withdrawing ₹400-800bn of liquidity and adding 1-2 basis points to the cost of funds. They added that this small dilution of net interest margins could be passed on to borrowers. The combined effect of the CRR hike and bond sale is expected to tighten banking system liquidity in the coming days, influencing money‑market rates and the overall market sentiment toward banking stocks.