The report said the securities, which are currently in Available for Sale bucket, are facing significant threat from rising yields which could leave a serious hole in their balance sheets. RBI's liquidity tightening measures including hike in MSF rate and the increased CRR requirement have led to rise in yields on bonds as short-term borrowing costs go up. So, when bond yields rise, prices fall. And, if the securities are marked to market, the value of those securities faces a huge blow.
According to a report from Business Standard, PNB's chairman and Managing Director K R Kamath said, "If the desired objective is not achieved in a couple of months and the rollback doesn't happen, probably there might be some amount of support that banks may look for in terms of the valuation of securities."
Among other things, bankers also demanded raising the Statutory Liquidity Ratio (SLR) floor to 25 per cent from the present 23 per cent while reducing the daily CRR requirement to 70 per cent from 99 per cent. RBI however ruled out changes in CRR rule.
Meanwhile, bankers also indicated that they will not increase lending rates soon despite recent liquidity tightening measures. "Loan demand is too weak. That is why there may not be enough demand. We are waiting because these steps are supposed to be temporary. So, unless they (the RBI) linger on for very long, none of the banks is increasing its loan pricing," said Chairman and Managing Director of State Bank of India, Pratip Chaudhuri.
"Short-term costs have, in any case, gone up for banks... what happens to long-term rates really depends on the time period," said Chanda Kochhar, managing director and chief executive, ICICI Bank.