New Delhi: Bank stocks on Tuesday gained up to 5 per cent 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 per cent, Syndicate Bank 4.52 per cent, Bank of Baroda 4.33 per cent, Indian Bank 3.59 per cent, UCO Bank 3.19 per cent, State Bank of India 2.72 per cent and Bank of Maharashtra 2.18 per cent on BSE. ICICI Bank gained 2.13 per cent and Axis Bank 1.49 per cent.
"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 yesterday allowed banks to spread provisions for bond losses in the third and fourth quarters of FY18 over the next four quarters. 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 yesterday.
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.
