(India) – Profits at India’s state owned banks could fall by more than 40 percent by 2005/6 due to a sharp drop in yields, according to domestic ratings agency the Credit Rating Information Services of India Ltd (CRISIL).The agency says the replacement of 85 percent of the bank’s government securities portfolios with low yielding bonds would have a significant impact on profitability.
The government is in the process of swapping high cost securities for cheaper bonds, and this could impact on yields by around 300 basis points.
CRISIL surveyed the portfolios of 10 large government banks, which account for 70 percent of assets in the state sector.