Transparency in state bonds

RBI right to link banks' valuation to market prices

The Reserve Bank of India (RBI) has announced major changes to how banks will have to value state government bonds, with far-reaching implications for the bond market and for state and central finances. Currently, state government bonds are accounted for on banks’ books using a straightforward yield-to-maturity approach; all state government debt, irrespective of which state has issued it, is marked up at 25 basis points above the yield of the equivalent Union government security, or G-Sec. This enforced uniformity will soon end, to be replaced with a valuation that is more closely tied to observed market prices. This is