The government has asked a clutch of major public sector banks (PSBs), including the country's largest lender by assets, State Bank of India (SBI), to furnish data on bond investment portfolios in the wake of the ongoing US banking crisis. Apart from SBI, the government has asked for data from Punjab National Bank (PNB), and Bank of Baroda (BoB), said people familiar with the development.
"The government has asked only major banks such as SBI, PNB, and BoB to submit data on their respective bond portfolios to check their status. It is also obvious that the government will not seek this information from banks that have small portfolios. These include Bank of Maharashtra, Punjab and Sindh, etc," told a source to Moneycontrol.
The move assumes significance as sharp value erosion in the bond portfolios of banks like Silicon Valley Bank (SVB) in long-term securities had caused the crisis in the US, which led to the collapse of at least three regional banks in the US.
“But in India, there's a limit on bonds for availability and selling. This is the main reason we will not face the United States-like crisis in India. So, the FM has simply asked the details of bonds from the Indian public sector banks for caution," one of the persons quoted above said.
This directive has come ahead of the scheduled meeting between finance ministry and public sector lenders on March 25 to take stock of the industry growth.
Bankers confirmed about the meeting, but said Indian banks are in a strong position.
“Indian banks are in a very strong position. RBI is holding meetings to follow up with Indian banks whether they are well capitalised or not. It was similar when COVID-19 happened and Prime minister Narendra Modi took a review meeting. Just for confidence building," said another person.
We have sent emails to the Finance Ministry, RBI and banks, and replies are awaited.
Rules on bank investments in bonds in India
As per RBI rules, banks have to mandatorily park 18 percent of their deposits in statutory liquidity ratio (SLR).
All scheduled commercial banks (including regional rural banks), local area banks, small finance banks (SFBs), payments banks, primary co-operative banks, state co-operative banks and district central co-operative banks shall maintain in India assets (hereinafter referred to as ‘SLR assets’) the value of which shall not, at the close of business on any day, be less than 18 percent of their total net demand and time liabilities in India as on the last Friday of the second preceding fortnight in accordance with the method of valuation specified by RBI from time to time.
SLR should not be less than 18 per cent of banks’ total net demand and time liabilities in India as on the last Friday of the second preceding fortnight in accordance with the method of valuation specified by RBI from time to time.
Investment by banks in G-Secs
Investments by banks in government securities (G-Secs) and State Development Loans (SDLs) surged by Rs 69,773.78 crore as on February 24.
According to the Scheduled Banks’ Statement of Position in India, banks’ investment in central and state government securities stood at Rs 54.77 lakh crore as on February 24, compared to Rs 54.07 lakh crore on February 10.