RBI Repo Rate Cut: Which banks can benefit the most and why – CNBC TV18

The Reserve Bank of India (RBI) on Friday, 7 February reduced the repo rate to 6.25% in the cut of 25 basis points. This step separates banks separately depending on their debt book structure and liquidity status.

People with high-fixed loans exposure and high loan-to-report ratio (LDRS) stand to achieve the most.

Winner: Banks with high fixed rates

Banks with a significant part of the fixed-ant loan will benefit immediately. Low rates allow them to refinance at affordable costs, increasing net interest margin (NIM) and profitability.

Major beneficiaries include:

• Bandhan Bank (77% fixed-per loan): the strongest position to capitalize on falling rates.
• AU Small Finance Bank (70%): Benefits from rehearsing opportunities.
• IDFC First Bank (61%): Better margin due to low funding costs.
• Indian Bank (50%): Moderate benefits but still gain stability.
• ICICI Bank (31%) and Axis Bank (30%): Floating-vet is in more contact for loans, but will still be seen with incremental benefits.

High LDR Bank: Promotion of loan capacity

Banks with high LDRs rely too much on external borrowings.

A low repo rate reduces their funding costs, making them more aggressively able to lend and improve profitability.

Major beneficiaries include:

• HDFC Bank (98% LDR): Reduces funding pressure, expands credit growth.
• IDFC First Bank (94%): Gets important breathing space for growing loans.
• Axis Bank (93%): Low cost of lending helps maintain the speed of lending.
• Bandhan Bank (91%) and Indian Banks (90%): Increase in the ability to support credit expansion.

Liquidity-rich bank: ready for expansion

There is sufficient liquidity to seize credit demand growth in banks with low LDRs.

The rate cut increases their flexibility to lend without excessive lending.

• SBI (77% LDR): well deployed to scale the loan.
• Indian Bank (90%): Benefits from a stable funding base.

Overall impact

• High-fixed-by loan banks (Bandhan, AU, IDFC First) get benefits through refinance and better NIM.
• High LDR Banks (HDFC, Axis, IDFC First) benefit from low funding costs, increase credit growth.
• Liquidity-rich banks (SBI, Indian Bank) have a place to lend and get market share.

key takeaway

The rate cut is on the side of banks with high fixed rate loan and elevated LDR. While the cost of funding falls, liquidity status and debt book compositions will determine long -term winners.