Banks urge RBI to change accounting rule for state bonds

BANKED HAVE URGED the Reserve Bank of India (RBI) to change the way state government bonds are valued on their books, saying current rules result in accounting losses and discourage further investment, sources said.

- PRATIGYA VAJPAYEE & BHASKAR DUTTA

In meetings with the RBI this year, some banks asked to be allowed to value the bonds closer to their prices at auctions. The current method requires a blanket yield depending on maturity, which undervalues bonds from fiscally stronger states and overvalues those with relatively worse financials.