Ahmedabad: The central bank has woken up after the loss in IndusInd Bank’s derivative portfolio was revealed. Taking a major decision, the Reserve Bank of India has started reviewing the derivative loan books of both public and private banks. The central bank is investigating the hedging status of most banks of the country. Apart from this, transactions related to derivatives trade are also being investigated.
The Reserve Bank of India wants to know whether other banks are not following the rules related to derivative trade. Apart from this, another question for RBI is whether banks are following internal policies, rules and regulations in the work related to Treasury. It is noteworthy that RBI issued strict guidelines for derivative operations in 2023. According to this rule, banks must divide their derivatives portfolio into three categories: levels 1, 2 and 3. Bank levels 3 do not pay dividends at unrealistic benefits and losses generated from the fair value of dominated assets. According to RBI rules, such unrealistic benefits generated from Level 3 derivatives will have to be reduced by CET-1 capital.
Due to this rule, IndusInd Bank told the stock exchange on March 10 that the internal review has revealed deficiencies in its derivative portfolio, which could have an impact of up to 2.35 percent on the bank’s net worth. The total assets of the bank by 31 March 2024. Its estimate is Rs 62,000 crore. On March 11, the bank shares fell by 27 percent.
