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The Reserve Bank of India (RBI) has reduced the quantum of securities that can be classified as Held-To-Maturity (HTM) from 200% to 100% of the audited Net Owned Funds (NOF) of the Primary Dealers as at the end of the preceding financial year. The new limits will come into effect from December 31.
“PDs are allowed to effect one additional transfer from HTM for the current quarter ending December 31, 2014 to enable them to comply with the new norms,” said RBI on Monday. Investment classified under HTM need not be marked to market. A cut in the limit is likely to result in illiquid securities being sold in the market.
Meanwhile, bond yields ended stable on Monday due to profit taking among traders. The yield on the 10-year benchmark bond ended 7.83% today, the same level at which it had ended on Friday. In the recent past bond yields have been falling due to expectations of rate cut by the central bank in 2015. Expectations started building on the back of softening in retail inflation numbers.
Consumer Price Index (CPI) inflation rose 4.38% year-on-year in November, slowest pace in data going back to January 2012.
Though RBI kept the repo rate unchanged at 8% earlier this month, the CPI inflation target was revised to 6% by March 2015. Earlier the target was to achieve 8% by January 2015.
