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Informist, Thursday, Aug 29, 2024

By Richard Fargose

MUMBAI – Fundraising through certificates of deposit surged today as Canara Bank and IDBI Bank tapped the market to meet their funding requirements, dealers said.

Canara Bank was the largest issuer today, raising 40 bln rupees through one-year CDs maturing at a coupon of 7.65%, dealers said. IDBI Bank borrowed 10 bln rupees through six-month papers at 7.57%.

Rates on CDs maturing in three months were unchanged at 7.20-7.25% today.

"Generally, two and three-month CDs are the rollover issuances, and six months and above papers are for the fresh fund demand," said a dealer with a brokerage firm. "We are increasingly seeing such issuances from banks now as they are struggling to boost their deposits."

With credit growth outpacing deposit growth, most banks have raised their deposit rates amid rising competition and are increasingly relying on bulk term deposits and certificates of deposit to fund their asset growth.

As per latest data, banks' loan book growth remained higher than that of bank deposits. Bank deposits grew 10.9% on year to 213.28 trln rupees as of Aug 9, compared with loan book growth of 13.6% on year.

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

Banks, especially state-owned banks, have also tapped the infrastructure bond route recently to raise funds.

Funds raised through commercial paper remained low today as borrowers continued to be on the sidelines waiting for rates to ease, dealers said. Companies raised CPs worth 1.6. bln rupees today, as against 14.50 on Wednesday.

Dealers said non-banking finance companies and brokerage firms have already raised funds for rollover in the last two weeks, hence, activity in the primary market is expected to remain subdued for the next few days.

Rates on short-term debt instruments remained steady today amid subdued activity, dealers said. Rates on three-month CPs issued by non-banking finance companies were flat at 7.60-7.65%, and rates on CPs of similar maturity issued by manufacturing companies were flat at 7.25-7.30%.

--Primary market

* Godrej Industries and Tata Housing Development Co raised funds through CPs.

* Canara Bank and IDBI Bank raised funds via CDs today.

--Secondary market

* Punjab National Bank’s CD of maturing Sep 18 was dealt at a weighted average yield of 6.9302.

* Larsen & Tourbo’s CP of maturing Friday was dealt five times at a weighted average yield of 6.6526%.

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 Akul Nishant Akhoury

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