Bond bonanza to help Indian banks battle world's worst bad loan ratio

The windfall treasury profits come as a relief for lenders staring at a potential surge in bad loan provisions due to a slowing economy and a cash squeeze in the nation's shadow banking system

One of Asia's best bond rallies is bolstering Indian banks' efforts to accelerate clean-up of the world's worst bad-loan pile.   

The benchmark 10-year sovereign bond yield dropped about 50 basis points in July, extending the past year's decline to more than 130 basis points. Each basis point fall in the yield adds Rs 3.5 billion ($50 million) to banks' treasury gains, boosting their ability to writedown bad loans, estimates by ICRA Ltd show.

The windfall treasury profits come as a relief for lenders staring at a potential surge in bad loan provisions due to a slowing economy and a cash squeeze