Banks Must Book Q4 Treasury Losses Now After RBI Decision

Reserve Bank of India (RBI) on 15 April 2026 disallowed banks' request to spread out treasury losses over several quarters; therefore, bankers will have to record the entire impact in their March 2026 results.

The time when increase in bond yields and global volatility are pressuring bank treasury portfolios, this move of the regulator will exacerbate the situation.

Leading banks including, ICICI Bank, HDFC Bank, and SBI, are expected to publish their Q4 and full FY26 results shortly. RBI's decision is expected to have a direct impact on what they disclose.

What Was The Request From Banks?

Banks had reached out to the RBI regarding a particular problem that they were facing. Since they were incurring mark-to-market (MTM) losses on their bond holdings, they sought permission to spread these losses over several quarters instead of recognising them entirely in Q4 FY26. Their earnings would have benefited from the smoothing effect, and the immediate blow to profitability would also have been reduced.

They also requested an extension to the 10 April 2026 deadline and for capping their Net Open Position (NoP) at $100 million.

Nevertheless, the RBI turned down the plea. Thus, all treasury losses have to be accounted for in Q4 itself, and any deferment or staggered recognition of losses will not be permitted.

What Are Treasury Or MTM Losses?

Banks invest heavily in government bonds and other fixed-income securities. Usually, when interest rates rise, bond prices fall and the market value of these investments declines. This leads to mark-to-market losses, which banks must reflect in their financial statements.

Recently, the yield on the 10-year government bond surpassed the 7% mark. When yields increase like this, it means that bond prices fall which is a simple cause-effect relation, so this has led to higher losses for banks' treasury books.

Why Are Losses Rising Now?

The recent rise in treasury losses is due to a combination of global and domestic factors that are affecting the markets at the same time.

Globally, bond yields have been rising as financial conditions tighten. At the same time, ongoing geopolitical tensions have made markets more volatile. Back home, changing liquidity conditions and inflation expectations have also pushed interest rates around.

Put together, all of this has led to sharp mark-to-market losses on banks’ bond portfolios.

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What Could Be The Impact Of This Decision?

This decision is likely to have a direct impact on Q4 results.

Banks may have to take all MTM losses in a single quarter, which might result in a decline in net profits and changes in return ratios. Treasury functions, which are the major source of profit by volume, may show losses or negative results. Besides that, the quarterly profits might seem weaker or more volatile as a result of this one-off effect.

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