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Informist, Friday, Aug 30, 2024

By Richard Fargose

MUMBAI – Banks continue to raise funds through certificates of deposit to meet their funding requirements amid the credit-deposit growth imbalance, dealers said.

CD issuances remained high this month as banks borrowed for fund rollovers and fresh funding needs also, dealers said.

Canara Bank was the largest issuer today, raising 20 bln rupees through six-month maturing CDs at a coupon of 7.49%, dealers said. IDBI Bank also borrowed 3.5 bln rupees through six-month papers at 7.57%, and 4.5 bln rupees via one-year paper at 7.75%.

Owing to firm issuances of such instruments, rates on CDs maturing in three months rose 5 basis points today to 7.20-7.25%, while those on one-year CDs also rose 7.65-7.70% from 7.60-7.65% on Thursday.

"Rates moved 3-5 bps higher today, as supply remains firm while mutual funds' demand was low due to month-end factors," said a dealer with a state-owned bank. "Also, issuances from banks also on a rise."

With credit growth outpacing deposit growth, many banks have raised their deposit rates and are increasingly relying other resources like 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.

Funds raised through commercial papers remained low today as borrowers continued to be on the sidelines waiting for rates to ease, dealers said. Companies raised CPs worth 5.75 bln rupees today, as against 1.60 bln rupees on Thursday.

Rates on commercial papers 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

* Mahindra & Mahindra Financial Services and Godrej Industries raised funds through CPs.

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

--Secondary market

* Canara Bank’s CD maturing Sep 9 was dealt twice at a weighted average yield of 6.9482%.

* Relaince Retail Ventures’ CP maturing Monday was dealt eight times at a weighted average yield of 6.9924%.

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 Deepshikha Bhardwaj

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