Letter to BS: Investors shun bonds of banks under RBI's PCA

For the first time, even the government guarantee is being viewed warily by promoters who wish to study their liquidity ratings and credit worthiness before investing

This refers to “Investors shun bonds of banks under PCA” (May 18). In an environment of investor distrust in the banking system, a drop in investment in bonds has compelled the Reserve Bank of India (RBI) to purchase the same from the market to create liquidity by way of open market operations. Mounting non-performing assets (NPAs) contributed by poor advances recovery, injudicious lending and sizeable frauds have subjected public sector banks (PSBs) to colossal losses and a consequent fall in market image. 

PSBs have, for long, symbolised security for the investor in view of sovereign protection. For the first time, even