State-owned banks fall on bond price slump

Reuters Market Eye - Shares in state-owned banks slump as a drop in bond prices sparks concerns about losses in their debt holdings.

The benchmark 10-year bond yield has risen as much as 95 basis points to a 14-month high since the RBI first moved to squeeze liquidity on July 15 in a bid to avert a sliding rupee.

The Reserve Bank of India took new steps on Tuesday to support the rupee, including lowering the overall limit for borrowing under the daily liquidity adjustment facility.

Banks are the biggest investors in government bonds as the holdings can be used to meet the central bank's statutory liquidity requirements.

State Bank of India falls 3.3 percent, Punjab National Bank is down 4.2 percent while Canara Bank falls 8 percent.

(Reporting by Abhishek Vishnoi)