RBI Allows Banks to Spread Debt Losses
When the RBI allowed the lenders to spread out trading losses, India’s sovereign bonds rallied up. This was a second policy decision in two weeks to revive a debt market that had sold off for seven months.
Yesterday, the Reserve Bank of India stated that the banks can account for their bond-trading losses, incurred in the past six months, over as long as four quarters.
The chief investment officer for debt stated that this move will definitely help in bringing state-run lenders back to the market. This is the biggest holders of debt.
It was seen that the government banks were staring at a potential market loss of 200 billion rupees. This was in the March quarter. The number is three times more than in the period to December. Banks have remained on the sidelines, hit by the erosion. They have been contributing to the deepest rout in two decades in the nation’s sovereign bonds.
It is believed that the recent set of news are positive for the market and suggest that the authorities are getting proactive in their approach.