Huge treasury loss staring at banks in June quarter

Will the RBI step in again to the rescue of the banks and ensure smooth sailing of the government's record borrowing plan this year?

The Indian banking industry’s celebrations over its FY2022 performance may not last long. Barring one private bank, all smiled their way to profits last year when the collective net profit of the listed banks was Rs 1.57 trillion, the highest in history.

The first quarter of FY23 could be a different story. Many banks’ profits will take a hit and a few of them could even end up being in the red because of treasury losses, triggered by a sudden spike in government bond yields in the rising interest rate cycle. Prices and yields of bonds move in opposite directions.