BANKS SEE TREASURY GAINS IN Q3

Banks will be offering healthy treasury income in the quarter ended December - though lower than the previous quarter - as they have taken measures to cushion the blow of hardening of bond yields and capitalised on high intraday volatility to offset any losses arising from provisioning for mark-to-market losses.


Banks started withdrawing money from liquid funds right from the beginning of December expecting the debt market to underperform. With yields on some of the highly traded government papers, like those maturing in 2019 and 2020, hardening by 30-50 basis points in the quarter ended September the treasury income of banks could have taken a hit. 

Indian money markets is considered as the worst performer in terms of return in 2009 among the 10 Asian local-currency debt indexes tracked by the HSBC Holdings. 

Currently, banks are required to invest at least 25% of their net demand and time liabilities in government bonds. The bond portfolio is divided into 3 categories — held-to-maturity , available for sale and available for trade. While the holdings in the held to maturity category are insulated from the volatility in the yields they have to provide for mark to market losses for holdings in AFS and ATF. 

S Sridhar, CMD of Central Bank of India, one of the oldest and largest PSU lenders shruggs off chances of treasury losses on account of hardening yields as others.


Source: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/Banks-see-treasury-gains-in-Q3-/articleshow/5414950.cms