Shares of small finance banks rose up to 2.5 percent on April 5 after the Reserve Bank of India (RBI) Governor Shaktikanta Das said the central bank has allowed SFBs to use rupee derivative product to hedge interest risks.
At present, SFBs are permitted to use only interest rate futures (IRFs) for proprietary hedging.
"It has now been decided to allow SFBs to use permissible rupee interest derivative products. This will allow further flexibility to SFBs for hedging their interest rate risk and enhance their resilience," Das said in his post-policy speech. The central bank will release a circular on this shortly.
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At 12.07 pm, AU Small Finance Bank shares were trading 1.2 percent higher at Rs 628 on the National Stock Exchange, extending the previous session's gains.
“The flexibility allowed to SFBs to manage interest rate risk through the use of permissible interest rate derivatives is a welcome step," said Sanjay Agarwal, Founder, MD & CEO, AU Small Finance Bank.
The lender on April 3 announced that its gross advances in Q4FY24 grew 25 percent year-on-year (YoY) to Rs 73,999 crore, supported by both retail and commercial banking segments. The bank achieved the highest-ever monthly disbursement in March. "The asset quality continues to remain within the long-term range," AU said in a regulatory filing.
Shares of Ujjivan Small Finance Bank, Suryoday Small Finance Bank, Equitas Small Finance Bank, ESAF Small Finance Bank and Capital Small Finance Bank rose up to 2.58 percent in morning deals.
Also Read | RBI policy meet: Small finance banks can use rupee interest derivative product, says governor
Recently, chief executives of various SFBs reportedly met RBI and urged for a glide path to become universal banks, as most of them are eligible for such a conversion having completed five years of operations.
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