RBI allows new lifeline to mitigate treasury losses
MUMBAI: The Reserve Bank of India has given a new lifeline to state-owned banks, which now face double-whammy of treasury and loan losses.
The central bank has allowed banks to spread their mark-to-market losses in different categories, a move that will help protect their profit margins.
“It has been decided to grant banks the option to spread the mark-to-market (MTM) losses on investments held in Available for Sale (AFS) and Held for Trading (HFT) portfolio for the quarter ending June 30, 2018, equally over a period of four quarters, commencing from the quarter ending June 30, 2018,” the central bank said in its bi-monthly policy statement.
The bond yields has been rising in the past one year with banks incurring mark-to-market losses.
BSE Bankex, an industry barometer, has shot up 0.60 per cent to 29,467 points.
In the wake of spurt in the yields of government securities, banks were given an option to spread, over four quarters, the mark-to-market losses recorded on their investment portfolio during the quarters ended December 2017 and March 2018, RBI said.
It was also required that banks build an Investment Fluctuation Reserve (IFR) of 2 per cent of their holdings in the AFS and HFT categories to avoid such eventualities.
The central bank has allowed banks to spread their mark-to-market losses in different categories, a move that will help protect their profit margins.
“It has been decided to grant banks the option to spread the mark-to-market (MTM) losses on investments held in Available for Sale (AFS) and Held for Trading (HFT) portfolio for the quarter ending June 30, 2018, equally over a period of four quarters, commencing from the quarter ending June 30, 2018,” the central bank said in its bi-monthly policy statement.
The bond yields has been rising in the past one year with banks incurring mark-to-market losses.
BSE Bankex, an industry barometer, has shot up 0.60 per cent to 29,467 points.
In the wake of spurt in the yields of government securities, banks were given an option to spread, over four quarters, the mark-to-market losses recorded on their investment portfolio during the quarters ended December 2017 and March 2018, RBI said.
It was also required that banks build an Investment Fluctuation Reserve (IFR) of 2 per cent of their holdings in the AFS and HFT categories to avoid such eventualities.