Banks would have booked Rs 30,000 cr MTM loss: Icra

After the RBI's relaxation yesterday, the losses will now get reduced to Rs 3,000-5,500 crore

Ratings agency Icra today said the country's banks were staring at a loss of up to Rs 30,000 crore on mark to market losses if not for the Reserve Bank's relaxations yesterday.

The losses will now get reduced to Rs 3,000-5,500 crore, it said in a statement released a day after the Reserve Bank got in the set of relaxations.

"Indian banks were staring at a Rs 25,000-30,000 crore Mark-to-Market (MTM) losses on their fixed income investment portfolio in Q2, FY14 as 10-year G-sec yields hardened from 7.45% as on June 30, 2013, to 9.2% by August 19," it said.

The losses for entire year on account of MTM have been estimated by Icra at Rs 9,000-17,000 crore for the system.

The measures introduced yesterday include the choice to maintain hold to maturity category bonds at 24.5% as against the earlier decision to bring it down to 23%, transfer securities qualifying for statutory liquidity ratio holding to the HTM category from available for sale category and an one time option to valuing those according to the yield on July 15.

RBI also allowed banks to amortise the MTM losses spread equally over the next three quarters.

It can be noted that yesterday's moves were necessitated due to the hardening of yields, following RBI's liquidity measures starting July 15 and the consequential fears of booking huge MTM losses by the banks.

Icra said as a consequence of the measures yesterday, there will be a "significant reduction" in the provisioning by banks' for the MTM losses.

The rating agency said as the bank have been given an option to convert, the AFS or HFT book will reduce to 5-6% on the portfolio as a result of the shift in investments to MTM.

They will also choose to move the longer duration securities to the MTM as the yields on those were higher only by 0.15% as on July 15 as against June 30, it said.

After the heavy fall in banking stocks yesterday, the BSE's sectoral Bankex gained 0.49% to close at 10,562 points.