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Informist, Friday, Jul 26, 2024

By Siddhi Chauhan

MUMBAI – The short-term debt market saw tepid fundraising today as demand for funds from banks dampened owing to a rise in liquidity surplus, dealers said. By the end of the day, only 31.00 bln rupees were raised through certificates of deposit against 85.75 bln rupees on Thursday, while issuances through commercial papers were at 28.00 bln rupees against 32 bln rupees on the previous trading day.

Bank of Baroda and Punjab National Bank were the only lenders that tapped the short-term debt market by raising funds through CDs today. While the Bank of Baroda raised 15 bln rupees through CDs maturing in three months at a rate of 7.14%, Punjab National Bank borrowed 16 bln rupees through three-month CDs at 7.15%. 

"The surplus has increased and will do so even more. Today we have received inflows for redemption and then government spending is also left," a dealer at a state-owned bank said. "This is why we have no need to borrow, the ones who are doing so is because of some internal need, maybe." The banks borrowed to fund the upcoming maturity of papers issued by them earlier, dealers said. 

The liquidity surplus in the banking system widened to 859.21 bln rupees on Thursday from 587.03 bln rupees on Wednesday, data from the Reserve Bank of India showed. The increase in the surplus was attributed to inflows on account of government spending and tax refunds from the government. During the day, inflows of 609.45 bln rupees were also added into the banking system on account of redemption of the 8.40%, 2024 government bond. 

Similarly, despite demand from investors, fundraising through commercial papers also witnessed a slight fall today. L&T Finance was the highest issuer of CPs which raised 16.50 bln rupees through three-month tenure paper at 7.64%. The remaining 11.5 bln rupees were raised by Network18 Media and Investments, TV18 Broadcast Ltd, Tata Capital, Aditya Birla Money, and ICICI Securities. 

CP issuance fell as there was little requirement of funds from issuers today, dealers said. "CP issuances have decreased even though there is demand from mutual funds," a dealer at a mid-sized brokerage firm said.
 

Rates on three-month CPs remained at 7.65-7.85%, while those of similar maturity issued by manufacturing companies were at 7.19-7.39%. Rates on CDs were quoted at 7.10-7.30%. 

--Primary market

* L&T Finance, Network18 Media and Investments, TV18 Broadcast Ltd, Tata Capital, Aditya Birla Money and ICICI Securities raised funds through CPs

* Punjab National Bank, Bank of Baroda raised funds through CDs

--Secondary market

*Union Bank of India's CD maturing on Aug 27 was dealt thrice at a weighted average yield of 6.9197%.

*L&T Finance Ltd's CP maturing on Jul 29 was dealt twice at a weighted average yield of 6.4527%.

At 1700 IST, the following were the volumes, in bln rupees, in the secondary market for short-term debt, as detailed by the Clearing Corp of India's F-TRAC platform:

End

Edited by Manisha Baxla

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