- The Reserve Bank of India has called on Urban Co-operative Banks (UCBs) to share their concerns directly through the Daksh portal.
- This follows a request from the Maharashtra Urban Co-operative Banks’ Federation, which is seeking relief from the increasing valuation pressures in government securities.
- In a concise yet important reply, the RBI said, “Thank you for the inputs.
- We encourage UCBs to also submit their feedback on the RBI’s Daksh portal.” This move shows that the central bank is eager to collect detailed, bank-specific insights before making any regulatory decisions.
- The federation pointed out that the rising yields in the Government Securities (G-Sec) market have led to mark-to-market (MTM) losses in Statutory Liquidity Ratio (SLR) portfolios categorized as Available for Sale (AFS).
The Reserve Bank of India has called on Urban Co-operative Banks (UCBs) to share their concerns directly through the Daksh portal. This follows a request from the Maharashtra Urban Co-operative Banks’ Federation, which is seeking relief from the increasing valuation pressures in government securities.
In a concise yet important reply, the RBI said, “Thank you for the inputs. We encourage UCBs to also submit their feedback on the RBI’s Daksh portal.” This move shows that the central bank is eager to collect detailed, bank-specific insights before making any regulatory decisions.
The federation pointed out that the rising yields in the Government Securities (G-Sec) market have led to mark-to-market (MTM) losses in Statutory Liquidity Ratio (SLR) portfolios categorized as Available for Sale (AFS). They warned that this situation could negatively impact UCBs’ financial performance in FY26, affecting profitability, capital adequacy, and credit ratings.
Citing the regulatory relief measures from the COVID era, the federation has asked for a one-time allowance to move investments from AFS to the Held to Maturity (HTM) category at their book value. They argue that this would protect banks from market fluctuations and help stabilize their balance sheets.
The RBI’s response indicates a willingness to engage in dialogue, with any potential policy changes depending on broader industry feedback.
The rise in bond yields has resulted in significant valuation losses for UCBs. Sources have informed Indian Cooperative that data from Maharashtra reveals a sharp decline in profitability due to the need for investment depreciation provisions.
Preliminary estimates suggest that a group of UCBs in the state, which collectively had pre-provision profits between Rs 450-470 crore, may need to set aside around Rs 350-380 crore for their government securities portfolio. This could significantly diminish their earnings.
For many smaller and mid-sized banks, these losses might even push their net results into the red, highlighting the serious stress in their SLR investment portfolios.