Mumbai: India’s state-run banks are likely to rally after the regulator allowed lenders to spread out losses on bond investments. To some analysts, the potential gain is an opportunity to sell their positions.
The Reserve Bank of India late Monday allowed banks to spread bond-trading losses incurred in the December 2017 and March 2018 quarters equally over as long as four quarters.
While this decision will provide some “relief” to government-owned banks in the short-term, it merely pushes the problem to the new fiscal year that began April 1, analysts said.
The Nifty PSU Bank Index, a gauge of state-owned banks, surged as much as 2.9 per cent — the most in a week. Union Bank of India rose as much as 5.4 per cent while Bank of India rallied 4.8 per cent.
The RBI’s move is also small comfort for India’s banking sector, which has been roiled by a series of fraud and corruption allegations that are expected to impact economic growth.
