PSU & private banks clock 60% higher gains in held-to-maturity bonds in H2FY25

Reserve Bank of India

State-owned and private banks clocked around 60 percent higher mark-to-market  (MTM) gains in the held-to-maturity (HTM) book in the second half of FY25 compared to the first.

According to the Reserve Bank of India’s (RBI) Financial Stability Report, at the end of March 2025, the notional MTM gains in the HTM books of state-owned and private banks combined increased to Rs 64,148 crore from Rs 40,187 crore in September 2024.

During the March 2025 quarter, unrealised gains rose across all categories of the HTM book, benefitting from the falling yield curve. The unrealised gains of PSBs (public sector banks) were predominantly in state development loans,  whereas for private banks it was in government securities.

The sovereign yield curve has steepened, driven by faster disinflation and monetary policy easing. Consequently, term spreads (between 10 and two-year government bonds) rose to an average of about 24 basis points (bps) between January–June 10, 2025, from 9 bps during July-December 2024, said an RBI report.

The rise in US treasury yields along with the fall in India government bond yields has narrowed the spread between India and US 10-year treasury yields to a 20-year low, the report added.

The bid-ask spreads on government bonds have also softened, especially among semi-liquid and illiquid securities, signalling improved trading conditions in the sovereign bond market, the report stated.