Govt's lower-than-expected borrowing will be positive for PSBs and NBFCs

In Q3, too, PSBs had to make significant provisions (hence mark-to-market losses) due to a sharp rise in yields

The government’s lower-than-expected borrowing programme for the first half of FY19 (H1FY19, or April-September 2018) will be positive for public sector banks (PSBs) and non-banking finance companies (NBFCs). Not surprising then, the Nifty PSU Bank Index surged about 3 per cent on Tuesday, while shares of some NBFCs were up over 1 per cent.

Investors reacted positively on account of expected benefits for these companies owing to a 29-basis point-(bps) decline in 10-year government bond (gilts) yields at 7.33 per cent.

This drop in yields indicates lower provisioning burden for PSBs in the January-March 2018  quarter (Q4) as the market