RBI's G-sec purchases under 'operation twist' a comforting factor for PSBs

The fall in 10-year G-Sec yields is estimated to benefit state-owned banks by Rs 5,760 crore; Nifty PSU Bank rises 3%

The Reserve Bank of India’s (RBI’s) move to purchase long-tenure government bonds (G-Sec) under ‘operation twist’ augurs well for public sector banks (PSBs). 

The Nifty PSU Bank index gained about 3 per cent on Friday, following the RBI’s second auction announcement on Thursday evening. 

The Nifty ended up 1 per cent gain on Friday. 

The expected mark-to-market (MTM) gains, on account of lower yields on G-secs, also lift the PSBs’ overall earnings outlook. 

The announcement of Rs 20,000 crore of 10-year G-Sec purchases by the RBI under ‘operation twist’ has, so far, led to a 24-basis-point (bp) fall in 10-year