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Informist, Tuesday, Aug 6, 2024

By Siddhi Chauhan

MUMBAI – Issuances in the short-term debt market fell today due to uncertainty regarding the Reserve Bank of India's three-day Monetary Policy Committee's meeting outcome due Thursday, dealers said. This uncertainty curbed demand from investors, resulting in lower issuances through commercial papers today.

Today, only 15.50 bln rupees were raised through commercial papers against 93 bln rupees on Monday. L&T Finance was the highest issuer today, raising 4.75 bln rupees through papers maturing this month, at a rate of 7.40%.

This was followed by National Bank For Agriculture And Rural Development, which raised 4 bln rupees through paper maturing in three months at a rate of 7.20%. Godrej Industries, Network 18, ICICI Securities, Aditya Birla Finance also raised funds through CPs. On Tuesday, NABARD was the largest issuer of CPs, raising 40 bln rupees through a three-month paper at 7.20%.

"There were not many issuances today, both through CDs and CPs. This is because investors are hesitating ahead of the MPC meeting outcome on Thursday," a dealer at a brokerage firm said. "Everyone will look forward to (RBI Governor) Shaktikanta Das' comments on liquidity and the measures that they will take." 
 

Market participants widely expect the rate-setting panel to keep the rates and stance unchanged. The market will look forward to the governor's comments on the liquidity management, dealers said. While most of them expect the continuation of the use of variable rate repo and variable rate reverse repo operations to keep a check on liquidity conditions, some still fear the possibility of surprises such as special measures to drain liquidity from the banking system.

"RBI is quite active in the forex (foreign exchange market) as well. That also normally has an impact on liquidity, so let's see if they will come up with a different tool for managing liquidity," another dealer at a brokerage firm said. 

Meanwhile, fundraising through certificates of deposits also fell to 1 bln rupees. This amount was issued by DCB Bank through paper maturing in three months at a rate of 7.65%. On Monday, only Punjab & Sind Bank raised 14 bln rupees through CDs.

Borrowing through CDs fell sharply due to an increase in liquidity surplus, thereby resulting in a decrease in demand for funds from banks. The liquidity surplus in the banking system widened to 2.86 trln rupees on Monday, the highest since Jul 6, 2022, from 2.78 trln rupees on Sunday, data from the RBI showed. So far, inflows of around 1.60 trln rupees from spending by the government have hit the banking system, dealers said.

Rates on three-month CPs issued by non-banking finance companies were steady at 7.60-7.65%, while those on papers with similar maturities issued by manufacturing companies were steady at 7.20-7.25%. Rates on CDs maturing in three months were quoted at 7.10-7.25%.

--Primary market

* Network 18, ICICI Securities, Aditya Birla Finance Ltd, Godrej Industries and L&T Finance raised funds through CPs

* DCB Bank raised funds through CDs

End

With inputs from Richard Fargose

Edited by Aditya Sakorkar

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