Nomura Holdings is currently conducting an internal investigation into its India fixed-income business, according to a Bloomberg News report. The probe, which was launched by the bank's compliance department, is focused on whether profits in the division were inflated in recent years.

The investigation is specifically examining how the company valued trades in STRIPS (Separate Trading of Registered Interest and Principal of Securities). STRIPS are bonds that have had their interest payments separated from the principal, creating two sets of securities that are valued independently.

According to sources familiar with the matter, senior officials in Nomura's rates division have been asked to assist in determining if there were any irregularities in the valuation of these trades. The inquiry is being led by the bank's compliance department.

Nomura Fixed Income Securities Limited, a subsidiary of Nomura Asia Investment (Fixed Income) Pte. Ltd., is registered with the Reserve Bank of India (RBI) as a non-banking financial institution and holds approval to operate as a primary dealer in India. The company is involved in various activities, including market making and trading in government securities, participating in primary auctions conducted by the RBI, and trading in interest rate swaps, currency futures, and interest rate futures.

The outcome of the investigation remains uncertain, but it could have significant implications for Nomura's operations in India. Depending on the findings, the bank may be required to restate its earnings or face regulatory penalties.

Nomura has been active in the Indian market, as evidenced by its fixed-income strategies and recommendations. In September 2023, Nomura initiated a trade to receive five-year offshore swaps while shorting the 10-year government bonds, anticipating that the gap between bond yields and swaps would widen. The investment bank also provides updates and analysis on government securities and the bond market in India.