Indian banks lose $95bn as RBI tightens liquidity
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- Reserve Bank of India defended a record‑low rupee, limiting its ability to inject liquidity and tightening financial conditions that could weigh on banks.
- Global investors withdrew a record 327 billion rupees ($3.5 billion) from financial services shares in the first fortnight of March, per National Securities Depository Ltd. data.
- Nifty Bank Index has lost $95 billion in market value since the start of March, narrowly avoiding a bear‑market definition of a 20 % drop from a recent high.
- Kranthi Bathini of WealthMills Securities warned that monetary policy could stay tight, but noted that valuations are becoming attractive after the correction.
- Citibank is prioritizing private‑sector banks over state‑run lenders, betting they can better absorb macro‑economic stress.
- Jefferies estimates banks could face up to 50 billion rupees in losses from unwinding currency trades due to central‑bank diktats.
- Fitch Ratings projects net interest margins for lenders to shrink 20‑30 basis points in the year ending March 2027, potentially below its 3.1 % forecast.
Why it matters: The $95 billion erosion of bank market value directly hurts Indian lenders, which comprise almost a third of the Nifty, and threatens to pull down the already lagging broader market. Tight RBI liquidity constraints and Middle‑East tensions pressure credit growth and net‑interest margins, squeezing profitability.
