Indian state-run banks gain as RBI allows lenders to spread bond trading losses

(Reuters) – Shares of state-run lenders rose on Tuesday after India’s central bank allowed banks to spread their bond trading losses, in a move that will likely boost the profitability of banks.

The Reserve Bank of India on Monday said lenders can spread bond trading losses incurred in the December 2017 and March 2018 quarters equally over up to four quarters.

The RBI has also asked banks to set aside profits on sale of their investments in bonds in a reserve from the current fiscal year.

The Nifty PSU bank index <.NIFTYPSU> climbed as much as 2.9 percent and was on track to snap a two-day losing streak.

State Bank of India rose 2.7 percent, contributing to a majority of the gains on the broader NSE index <.NSEI> which was up 0.07 percent as of 0403 GMT.

Union Bank of India Ltd jumped 4.8 percent while Bank of Baroda Ltd and Syndicate Bank Ltd were up over 3 percent each.

Punjab National Bank , which is currently entangled in a more than $2 billion loan-fraud scandal, rose 2.5 percent.

(Reporting by Jessica Kuruthukulangara in Bengaluru; Editing by Sunil Nair)