As a result of the RBI's operation twist', banks may report gains in their bond portfolio, albeit lower QoQ, as the decline in benchmark yields has been lesser vs. that in 2Q. We expect stable spreads, although NIMs may contract due to lower CD ratios. Banks that witness high recoveries may however see a benefit on the margin front as well. Corporate heavy banks like SBIN and ICICIBC are likely to benefit from substantial recoveries (Essar Steel, Ruchi Soya, Prayagraj Power and Rattan India Power to name a few). However, due to tepid macros, banks slippages may remain elevated (HFCs, SME and Agri are potential sources). Further, the RBIs recent financial stability report has (1) forewarned that banks GNPAs may increase by ~60bps from 9.3% by Sept-20, and (2) noted a sharp 143bps increase in SMA II between Jun-19 and Sep-19. The increase in SMA II may have been due to the earlier default by a large HFC. Floods and unseasonal rainfall, and civil unrest in the eastern India may impact (slightly) AFCs asset quality.