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Informist, Wednesday, Aug 21, 2024

By Richard Fargose

MUMBAI – Rates on commercial papers and certificates of deposits rose today in the primary segment owing to firm issuances of such instruments, dealers said.

Rates on three-month CPs issued by non-banking finance companies rose to 7.60-7.65% from 7.55-7.60% on Tuesday, while those on papers of similar maturities issued by manufacturing companies also rose 5 basis points to 7.25-7.30%. Rates on CDs maturing in three months inched up to 7.20-7.25% today from 7.15-7.20% in the previous session.

So far today, CPs worth 59.50 bln rupees were issued, compared with 56.50 bln rupees on Tuesday. Reliance Jio Infocomm Ltd, the largest issuer today, raised 40 bln rupees through three-month papers at 7.22%. This was followed by Poonawalla Fincorp, which raised 5.5 bln rupees via three-month CPs at 7.73%.

Companies tapped the market to refinance maturing papers and raise funds ahead of festival season, dealers said.

Earlier this week, the Reserve Bank of India's monthly bulletin said that CP issuances increased to 4.86 trln rupees till Jul 31 from Apr 1, surpassing 4.72 trln rupees in the corresponding period of the previous year, driven by non-bank lenders' higher borrowings in the CP market.

"Investors are seeking higher rates now as both CP and CD issuances are on rise," said a dealer with a large brokerage firm.

Today, Punjab National Bank raised a total of 85 bln rupees through three-month CDs at 7.20%. Market participants said CD issuances have risen as deposit growth is lagging credit growth, which is prompting banks to rely on alternative sources of funding.

From Apr 1 to Aug 20, CD issuances amounted to 3.77 trln rupees, almost 66% higher as compared to 2.28 trln rupees issuances in the corresponding period in the previous fiscal year.

While bank deposits remain the dominant part of financial assets owned by households, its share has been declining with households increasingly allocating their savings to mutual funds, insurance funds and pension funds.

According to the latest Reserve Bank of India data, bank deposits grew 11.3% on year as of July 12 compared with 14.0% growth in credit. With credit growth outpacing deposit growth, banks have raised their term deposit rates in addition to mobilising funds through higher issuances of CDs.

--Primary market

* Reliance Jio Infocomm, Poonawalla Fincorp, Birla Group Holdings, Small Industries Development Bank of India, HSBC InvestDirect Financial Services, Aditya Birla Housing Finance, Godrej industries, and Kotak Mahindra Prime raised funds through CPs.

* Punjab National Bank raised funds via CDs.

--Secondary market

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

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Aditya Sakorkar

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