Indian bond markets shouldn't fear HTM cut: banks
Standing for held-to-maturity (HTM), it refers to a type of debt that Indian banks must hold until maturity.
Reserve Bank of India is widely expected to cut the current limit to 23 percent from 25 percent, starting early next fiscal year, to spur more lending and bolster a sluggish economy.
Indian bond investors had feared any cut in the limit would spark widespread debt sales, but bankers say that is misplaced given major lenders are already well below the existing limits after paring their holdings during a debt market rally.
Banks are also selling some of the debt held under HTM to the RBI under the open market operations, dealers say.
Major state-run lenders - the main buyers of government bonds - have already cut down their HTM holdings to 23 percent or below, according to K.R. Kamath, chairman and managing director of Punjab National Bank in Delhi.
"For PNB, our HTM holding is already below 23 percent, so there won't be any impact on our debt portfolio due to any HTM cuts," says K.R. Kamath, who is also the chairman of trade body Indian Banks' Association.
"Most banks, I think, will be in a similar position. For others at least 2 percent of the 25 percent HTM holding should be in the money," Kamath says.
Other banks that have already cut their holdings below the 25 percent limit include State Bank of India, Bank of Baroda, Canara Bank Ltd,
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