Reasons Why Nifty Bank, Financial Services, PSU Banks Were Underpressure

Banking stocks are under pressure, but the key concern may not be higher interest rates. Sameer Dalal, President, Natverlal & Sons Stockbrokers explains why higher-than-expected RBI rate hikes could hurt NBFCs more than banks, with banks generally able to pass on higher funding costs through floating-rate loans. Instead, the bigger concern is rising stress in the farm sector amid drought conditions. If more states report drought, banks could face higher agricultural NPAs, increased provisions and pressure on profitability and return on equity. The expert says the impact of higher rates is largely already priced into the banking system, while a potential rise in farm-sector NPAs is emerging as a bigger risk for bank earnings.