Fluctuating bond yields key risk for banks' profitability, NIMs in FY22

Valuations likely to take 13-23 per cent hit if rates increase by 100-200 bps, say analysts

Post Wednesday’s monetary policy, 10-year bond yield once again softened to 6.0313 per cent on Thursday. While this is a sign of relief, given that it comes after a near 40-basis-point increase in rates seen in recent times, the Street is beginning to take note of the vast fluctuations in the bond yields.

For FY22, with reasonable stability setting in on loan growth expectations (though moderate at 10–12 per cent year-on-year) and asset quality issues more or less transparent, the major factor to watch out for would be the behaviour of bond yields, as it can impact the profitability or