These measures announced by the RBI led to the Nifty Bank reclaim 55,000 levels

The Nifty Bank has surged over 650 points on Wednesday, October 1, after the Reserve Bank of India, in its policy statement, announced a slew of measures with regards to the banking system.

The surge in the Nifty Bank has taken the index past the 55,000 mark, and is now closing in on the 55,300 levels.

Here are the measures that RBI Governor Sanjay Malhotra announced in his post-policy address:

• Expected Credit Loss (ECL) framework to be applicable to all banks from April 1, 2027.


• Banks will be given a glide path till March 31, 2031 to smoothen the one-time impact of higher provisioning if anym on their existing books, due to the ECL framework.


• Revised Basel-III Capital Adequacy Norms, effective for commercial banks, excluding Small Finance Banks and Regional Rural Bank.


• To issue Standardised Approach for Credit Risk draft rules- propose lower risk weights on certain segments are expected to reduce the overall capital requirements, particularly for MSMEs and residential real estate. This also includes home loans.


• Draft circular on Forms of Business and Prudential Regulation to be issued shortly. Proposed regulatory restriction on overlap in the businesses undertaken by a bank and its group entity(ies) is being removed from the final guidelines- it will be left to the wisdom of Bank Boards. This resulted in shares of HDB Financial gaining as much as 3%.


• To introduce risk-based deposit insurance premium with the currently applicable flat rate of premium as the ceiling.

In order to improve credit flow in the banking system, there were more measures announced by the RBI Governor. They include:

• To provide an enabling framework for Indian banks to finance acquisitions by Indian corporates.


• To remove the regulatory ceiling on lending against listed debt securities


• To enhance limits for lending by banks against shares from ₹20 lakh to ₹1 crore


• To enhance limits for lending by banks for IPO financing from ₹10 lakh to ₹25 lakh per person


• Proposed to withdraw the framework introduced in 2016 that disincentivized lending by banks to specified borrowers (with credit limit from banking system of Rs.10,000 crore and above)


• Concentration risk at the banking system level, as and when considered necessary, will be managed through specific macroprudential tools


• To reduce the cost of infrastructure financing by NBFCs, it is proposed to reduce the risk weights applicable to lending by NBFCs to operational, high quality infrastructure projects

The Nifty Bank is now trading with gains of close to 700 points, nearing the recent swing high above the 55,700 mark, currently trading above the level of 55,300. The move on the Nifty Bank has also translated on to the Nifty 50 index, which is now trading close to the 24,800 mark.

Nifty Bank constituents such as ICICI Bank, HDFC Bank, Axis Bank are all trading with gains between 2% to 2.5%.