In the wake of continuing rise in bond yields, the Reserve Bank today allowed banks to spread their mark-to-market (MTM) losses for the June quarter as well.
In April, RBI had given banks an option to spread provisioning for MTM losses recorded on their investment portfolio during the quarters ended December 2017 and March 2018.
The central bank had also asked banks to build an Investment Fluctuation Reserve (IFR) of 2 per cent of their holdings in the Available for sale (AFS) and Held for Trading (HFT) categories to build up adequate reserves to protect against increase in yields in future
In view of the continuing rise in yield of government securities as also the inadequacy of time to build IFR for many banks, it has been decided to grant banks the option to spread the MTM losses on investments held in AFS and Held for Trading HFT portfolio for the quarter ending June 30, 2018, equally over a period of four quarters, commencing from the quarter ending June 30, 2018, RBI said today.
The central bank will come out with a circular on this within a week.
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