RBI may allow banks to sell state paper ahead of maturity

The move will also allow states to buy back bonds and issue a new lot with lower coupon

The Reserve Bank of India (RBI) is likely to give some leeway to banks to classify their state development loans (SDL) holdings.

In a meeting with States, the central bank have said they are looking into the matter to let banks shift a portion of their held to maturity (HTM) to available for sale (AFS) basket for SDLs without disclosing in details.

This enables two things: One, in a falling interest rate scenario, banks can sell the papers and gain on their previous holdings without waiting for the bonds to mature, and second, it is beneficial for states as they can buy