Speaking to CNBC-TV18 about RBI's move, Arun Kaul, chairman, UCO Bank said, its AFS portfolio has not seen much depreciation and the bank is in a comfortable position. He also said that he sees cost of funds more or less remaining the same. So, there is no urgent need for it to push up the base rate immediately.
"Our AFS portfolio approximately is about 22 percent of the G-Secs of which the major amount is treasury bills. We have not been buying securities since yield went below 8 percent," he added.
AFS is a debt or equity security which is purchased with the intent of selling before it reaches maturity, or selling prior to a lengthy time period if the security does not have a maturity.
Bank of Baroda chairman SS Mundra told CNBC-TV18 that the bank did hold AFS portfolio which was sensitive to interest rates. "As far as MTM is concerned, the relief would be relevant on September 30 when we close the books. Even if I look at today's situation, the figure would be around Rs 500 crore and would be something, which will not be required to be provided for," he added.
Further, he added that there is continuing stress on asset quality in the prevailing circumstances and he does not see any incremental impact on asset quality post RBI measures.
Below is the verbatim transcript of their interview to CNBC-TV18
Q: How much do you have in available-for-sale (AFS), how much in held-to-maturity (HTM) and how much relief therefore in the September quarter itself in terms of less mark-to-market (MTM) losses?
Mundra: We had an AFS portfolio which was really sensitive to rate of interest. AFS portfolio would also carry the non-interest rate sensitive securities, treasury bills etc. which was around 14-14.5 percent, then of course the HTM and all other things are there. As far as relief is concerned, number one relief or no relief or what would have been the MTM situation would be ultimately the relevant date would have been 30th September when you are closing the books and you are marking it.
Even if I look at today's situation, there would be something if I put the relevant date as today something like Rs 500 crore or so. This would be something which will not be required to be provided for. This is how the situation is.
Q: We have to take a ballpark figure. 10-year bond was Rs 95 on July 15th and it fell to a low of Rs 86 or even lower when the yield was 9.47 percent.
Mundra: That is the point I am telling. If I would have been required believing that the peak yield which had gone up to 9.40 percent or so would have persisted till 30th September then I would have been required to provide something like Rs 500 crore towards the MTM. This now under the new dispensation would not be required to be provided for.
Q: You are also getting a relief on not having to reduce your HTM to 23 percent by March 31st. You can freeze it at 24.5 percent. So on an overall basis there would be little more gains in the year end. It will be difficult to calculate perhaps, but your profits would appropriately go up. Can you give a ballpark for that as well?
Mundra: It is very difficult. As you also said to give a ballpark figure would be almost next to impossible, but the point I am trying to tell you that now with this and the remaining AFS portfolio we would not be seeing that there would be any significant pressures.
Q: For UCO Bank in particular can you detail what stands in your AFS portfolio, HTM portfolio and how much would you be transferring post the measures last evening?
Kaul: Our AFS portfolio approximately is about 22 percent of the G-Secs of which the major amount is treasury bills. So, we are in a very comfortable position. There is not much depreciation of portfolio at all. We have not been buying securities for quite sometime since the yield went below 8 percent and we have been very slow on the buying. Duration of the portfolio should be around 2-2.4 percent. So, there is not much of a problem as far as the UCO Bank is concerned.
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