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Home / Business News / Bank stocks rise up to 5% on RBI move, even as Sensex trades lower

Bank stocks rise up to 5% on RBI move, even as Sensex trades lower

Bank stocks gained after the Reserve Bank on Monday allowed lenders to spread provisions for bond losses in the third and fourth quarters of FY18 over the next four quarters.

business Updated: Apr 03, 2018 14:02 IST
Press Trust of India, Mumbai
The Reserve Bank of India headquarters in Fort, Mumbai.
The Reserve Bank of India headquarters in Fort, Mumbai.(Aniruddha Chowdhury/Mint)

Bank stocks gained up to 5% after the Reserve Bank of India allowed lenders to spread provisions for bond losses in the third and fourth quarters of FY18 over the next four quarters.

Shares of Bank of India rose by 4.92%, Syndicate Bank 4.52%, Bank of Baroda 4.33%, Indian Bank 3.59%, UCO Bank 3.19%, State Bank of India 2.72% and Bank of Maharashtra 2.18% (intra-day) on the Bombay Stock Exchange (BSE).

ICICI Bank gained 2.13%, while Axis Bank was up 1.49%.

The benchmark BSE Sensex was trading 0.15% or 51.50 points lower at 33,203.86, at 1.53 pm.

“The RBI has once again provided a breather, especially to the capital-starved PSBs which are under pressure due to colossal NPAs. The move is expected to optically cushion profitability in the near term while providing banks with an opportunity to incrementally provide for stressed assets,” HDFC Securities said in a report.

The Reserve Bank on Monday allowed banks to spread provisions for bond losses in the third and fourth quarters of FY18 over the next four quarters.

| Read: Why these analysts think RBI-induced rally in banks is a selling opportunity

The central bank said the provisioning for each of these quarters may be spread equally over up to four quarters, commencing with the quarter in which the loss was incurred.

“With a view to addressing the systemic impact of sharp increase in the yields on government securities, it has been decided to grant banks the option to spread provisioning for mark-to-market (MTM) losses on investments held in the available-for-sale (AFS) and in the held-for-trading (HFT) for the quarters ended December 2017 and March 2018,” RBI said in a notification on Monday.

The move comes as a big breather for banks which have been fighting record bad loans on top of the massive spike in bond yields since the past two quarters.

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