2023-09-14 09:38:21am | Source: LKP Securities
Quote on today`s RBI`s New Valuation Rules for Bonds by Ajit Kabi, LKP Securities
Below the Quote on today`s RBI`s New Valuation Rules for Bonds by Ajit Kabi, Banking analyst at LKP Securities
"RBI has removed the cap on HTM bond investment by banks. Typically, Government bonds are categorized as HTM investments. Currently the investment limit is 19.5% of the bank's net deposit.
The recent move will allow banks to invest more on Govt securities and state development bonds. The new norm is likely to reduce the earning volatility on banks because HTM bonds need not be marked to market.
Investment in the AFS (available for sale) category also benefits since the new norms state they can move all valuation gains or losses in this category to an AFS reserve, bypassing their income statement."
The recent move will allow banks to invest more on Govt securities and state development bonds. The new norm is likely to reduce the earning volatility on banks because HTM bonds need not be marked to market.
Investment in the AFS (available for sale) category also benefits since the new norms state they can move all valuation gains or losses in this category to an AFS reserve, bypassing their income statement."
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