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of various banks luring them to update sensitive account information like their, User IDs, Passwords,
even transaction Passwords, etc., by clicking on an e-mail link or by visiting a website. Similarly, the
same information is also asked via telephone call (globally known as Vishing attack), pretending to be
genuine officer from Bank Of India
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(Posted on sites today online)

Bank stocks take a hit on shrinking margin fears

MUMBAI: Bank stocks have begun the year on a weak note with heavyweights falling 8-9 %
during the week. The decline reflects fears that interest margins may get crunched as cost of
funds rises for banks even as competition forces them to hold on to lending rates.

On Friday, bank stocks fell with the rest of the market amid widespread rumour
that Reserve Bank of India will hike interest rates in response to Thursday inflation data
which showed that food prices rose by over 18%. Fears of a rate hike also kept banks away
from a Rs 13,000-crore auction of central government bonds conducted by RBI on Friday
resulting in Rs 2,200-crore devolvement.

RBI will hold its next quarterly review of its monetary policy on January 25. Markets have
already factored in a 25 basis point hike in interest rates. However, with inflation now
spiking to new highs, there are fears that RBI may front-end its rate increases and raise
rates by 50 basis points.

Inflation has another indirect impact on bank's wages . Since salaries and pensions are
inflation-indexed , a rise in inflation would soon translate into a higher wage bill. Given that
bond yields on end-December have been higher than the previous quarter, there is a fear
that banks will take a mark-tomarket hit when they start reporting third quarter results this
month.

All these factors have contributed to a host of downgrades in the banking sector. RBS and
BNP have lowered their recommendation on Axis bank and HDFC respectively to 'sell'
. CLSA andMorgan Stanley have indicated that they are now underweight. In a report
released on Friday, RBS said that it was underweight on the financial sector.
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