MTM Provisions: Banks may seek RBI relief again

After taking a significant hit in the June quarter on this account, banks will once more request permission from the Reserve Bank of India to spread out provisions for mark-to-market losses across several quarters. According to bank executives knowledgeable of the situation, the RBI rejected a similar request from banks in June because it expected big losses in the first quarter.

This would also give a fairer estimate of operating performance, according to the banks.” This will help in avoiding fluctuations in the operating profits,” said one of the persons. 7% drop in standalone profit after tax to 6,068 crores for the June quarter after it booked 6,549 crores MTM losses on its investment book. Its operating profit dropped to 12,753 crores in the April-June period from 18,975 crores in the year earlier, dented by MTM losses. RBI Offered Relaxation in 2017 In the past, the RBI had allowed banks to stagger MTM losses over four quarters starting December 2017.

The official cited above stated, “We will get in touch with the RBI once more.” At a recent lender meeting hosted by the Indian Banks’ Association, a few banks had already brought up this concern. The MTM loss for the June quarter for Punjab National Bank was Rs 1,409 crore. For the first quarter of FY23, the rating agency ICRA projects MTM losses in the banking industry of between Rs 10,000 and Rs 13,000 crore.

According to general opinion, the RBI is likely to increase the repo rate by another percentage point or more, which would cause additional MTM losses for banks. Banks will benefit since they will be able to write down part of the MTM losses if yields do not harden. “We’ve conducted a sensitivity analysis of some kind.