PSU banks M-cap dips Rs 3,500 cr

In fact, banks which made huge treasury gains in recent years would not be able to generate profits from treasury gains in a rising interest rate regime.

SBI had issued a profit warning last week. SBI Chairman A.K. Purwar had said last week that the bank would take a knock on account of the depreciation in its Rs 1.85 lakh crore gilts portfolio. ‘‘This is a tough time for the bank. The yields have appreciated over 135 bps in the last three to four months, putting enormous pressure on the bottomline,’’ Purwar said.

The new RBI guidelines allow banks to offset their profitable gilts portfolio against the loss ones. But for this norms SBI would have lost Rs 2,200 crore from its G-sec portfolio in the year.

In a recent note, Morgan Stanley has noted that PSU banks will not be able to book any treasury gains in FY 2006. State-owned banks will also be affected by increased cost pressure.