Bank Nifty Soars 700 Points, Fin Nifty Rises 1.2% On RBI’s Lending And Capital Rule Proposals | Markets News

Bank Nifty Shares

The Bank Nifty reclaimed the 55,000 mark on October 1 after the Reserve Bank of India (RBI) kept the repo rate unchanged at 5.5% for the second consecutive meeting and proposed a series of reforms to boost bank lending. The rally was driven by Kotak Mahindra Bank, ICICI Bank, and HDFC Bank, which gained up to 3% intraday.

At 12:05 PM, the Bank Nifty was trading 700 points (1.3%) higher at 55,350. While the Nifty Private Bank index advanced 1.75%, the Nifty PSU Bank index saw profit-booking and slipped 1.1%.

Announcing the fourth bi-monthly monetary policy of FY26, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) unanimously decided to keep the repo rate unchanged at 5.5% with a neutral stance.

Key Policy Proposals

The RBI proposed an expanded scope for capital market lending by banks, enabling them to finance corporate acquisitions. It announced the withdrawal of the 2016 framework that restricted bank lending to large corporations to reduce concentration risks—paving the way for increased lending to big corporates.

Additionally, the RBI introduced greater flexibility for banks to open and maintain borrower accounts, permitted unrestricted bank lending against listed debt securities, and raised the limit on lending against equity shares. The cap on bank financing for IPOs was also increased to Rs 25 lakh per individual from Rs 10 lakh.

The Nifty Financial Services index surged 1.4% to 26,396, driven by the RBI’s move to lower risk weights for infrastructure loans by non-bank lenders—a change aimed at easing credit flow for the country’s road and bridge construction projects.

Shares of several NBFCs, including HUDCO, IREDA, PFC, and REC, climbed 3–5% after the RBI announced the reduction of risk weights on NBFC lending to operational, high-quality infrastructure projects, which is expected to lower financing costs for the sector.

“Harmonisation of over 9,000 compliances, a level-playing field for banks for capital market exposure and corporate acquisition, along with a dovish tone keeping the room open for future rate cuts, is in sync with the government’s push to stimulate the economy,” said Nilesh Shah, Managing Director at Kotak Mahindra Asset Management Company, in a statement to Reuters.

Capital Rules and ECL Framework

On capital adequacy, the RBI announced that the Expected Credit Loss (ECL) framework—requiring banks to set aside more funds for potential bad loans—will come into effect on April 1, 2027. Banks will be given until March 31, 2031, for full implementation of the framework.

The RBI also proposed implementing Basel III capital norms for banks starting April 1, 2027, and said draft credit risk rules will be issued shortly. These draft norms are expected to lower risk weights for certain segments, such as small enterprises and residential real estate, including home loans, thereby easing capital requirements for these sectors.