Shares of state-run lenders rose on Tuesday after the Reserve Bank of India (RBI) allowed banks to spread their bond trading losses, in a move that will likely boost the profitability of banks.
RBI on Monday said lenders can spread bond trading losses incurred in the December 2017 and March 2018 quarters equally over up to four quarters. The RBI has also asked banks to set aside profits on sale of their investments in bonds in a reserve from the current fiscal year.
The Nifty PSU bank index climbed as much as 2.9% and was on track to snap a two-day losing streak.
State Bank of India rose 2.7%, contributing to a majority of the gains on the broader NSE index which was up 0.07% as of 9.33am. Union Bank of India Ltd jumped 4.8% while Bank of Baroda Ltd and Syndicate Bank Ltd were up over 3% each.
Punjab National Bank, which is currently entangled in a more than $2 billion loan-fraud scandal, rose 2.5%.