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Informist, Wednesday, Sep 4, 2024

By Siddhi Chauhan

MUMBAI – Borrowing through short-term debt instruments rose today as big ticket issuers tried to take advantage of the appetite shown by mutual funds, dealers said. Fundraising through commercial papers rose to 127.25 bln rupees against 114.75 bln rupees on Tuesday. Certificate of deposit issuances also rose to 55.50 bln rupees against 48.25 bln rupees on the previous day. 

Borrowing through CPs crossed the 100 bln rupees mark for the third consecutive session as big ticket issuers such as the Export and Import Bank, Reliance Retail Ventures, and L&T Finance raised 96 bln rupees cumulatively through the short-term debt instrument.

Export and Import Bank raised 50 bln rupees through CPs maturing in three months at 7.24%. Reliance Retail Ventures raised 25 bln rupees through CPs maturing in three months at 7.27%, while L&T Finance raised 21 bln rupees at a rate of 7.40% through CPs maturing in this month. 

"This is the time when we (mutual funds) start getting funds back after month-end, so issuers are trying to raise as much funds as they can," a dealer at a mutual fund said. "This is why you will see an increase in CP issuances from now on." 

They were also seen engaging in spread trading in the secondary market by selling papers of one month maturity and buying those maturing over three months in order to get better returns, dealers said. 

Similarly, CD issuances also rose as banks borrowed in order to raise funds for repayment, dealers said. Indian Bank alone raised 39 bln rupees through papers maturing in three months at 7.24%, while Bank of Baroda raised 12.50 bln rupees through three-month paper at 7.21%. State Bank of India, which is not a frequent issuer, also raised 4 bln rupees through papers maturing in three months at 7.15%.

"Many banks are raising funds today in order to account for their maturity due this month," a dealer at a state-owned bank said. "Some are also doing so because of fund requirements, similar could be the case with SBI." 

This was despite the liquidity surplus in the banking system rising to 2.48 trln rupees on Tuesday, against 2.23 trln rupees on Monday, Reserve Bank of India data showed. As a result, many banks were seen buying papers in the secondary market as the current rates were lucrative for them, dealers said. 

Some dealers also said that with credit growth outpacing deposit growth, many banks have raised their deposit rates and are increasingly relying on other resources like CDs to fund their asset growth.

Rates on three-month CPs issued by non-banking finance companies were steady at 7.60-7.65%, and those on papers of similar maturities issued by manufacturing companies were unchanged at 7.25-7.30%. Rates on CDs maturing in three months were at 7.20-7.25%.

--Primary market

* Export and Import Bank, Reliance Retail Ventures Ltd, L&T Finance, Tata Projects, Grasim Industries, Larsen and Toubro, Godrej Consumer Products, Tata Housing Development, Aditya Birla Finance Ltd, Aditya Birla Money, Kotak Mahindra Prime Ltd, and Toyota Finance raised funds through CPs

* Bank of Baroda, State Bank of India, and Indian Bank raised funds via CDs.

--Secondary market

* Canara Bank's CD maturing on Sep 13 was dealt seven times at a weighted average yield of 6.8696%.

* Bajaj Financial Securities Ltd's CP maturing on Thursday was dealt once at a weighted average yield of 6.3521%.

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

With inputs from Sachi Pandey

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

Edited by Aditya Sakorkar

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