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Informist, Tuesday, Sep 10, 2024

By Sachi Pandey

MUMBAI – State Bank of India today tapped the short-term debt market to raise a massive 100 bln rupees through certificates of deposit maturing in three months at 7.24%, dealers said. This is after a long time when a bank raised such a huge amount through CDs in one go. 

"I believe they must have some sudden demand for funds, otherwise jumping from 7.15% to 7.24% and giving away 9 bps (basis points) extra within a span of a few days, especially for a bank like SBI is a big deal. So high chances that they had some urgent cash requirement," a dealer at a mid-sized brokerage firm said. 

The last time the country's largest lender tapped the short term debt market was on Sep 4, when it raised 4 bln rupees through CDs maturing in three months at a rate of 7.15%.  

Following SBI's issuance, the rates on CDs maturing in three months inched up to 7.27-7.47% from 7.24-7.44% on Monday, dealers said. 

Canara Bank raised 35 bln rupees through CDs maturing in three months at a rate of 7.28%, while Punjab and Sind Bank raised 15 bln rupees at 7.34% through three-month CDs.   

According to dealers, issuances of certificates of deposit have stayed elevated since last month amid the credit-deposit growth imbalance, and this trend is likely to continue until banks address the issue of lagging deposits.

"The anticipation is that it's almost the second half of the financial year, so currency circulation is likely to increase, which will put strain on liquidity. So right now, given the benign conditions, it is better to shore up our short-term funds," an official at a public sector bank said.

On Monday, the liquidity surplus in the banking system was 1.35 trln rupees, slightly lower than 1.52 trln rupees on Sunday, according to the Reserve Bank of India data. The liquidity surplus narrowed due to outflows worth 290 bln rupees for the payment of government securities auctioned on Friday, dealers said.

The overall borrowing through commercial paper slowed down today due to lack of big-ticket issuances, dealers said. Today, companies and financial institutions raised only 24.50 bln rupees through CPs against 54.25 bln rupees on Monday.

Shriram Finance was the largest issuer today, raising 12 bln rupees through CPs maturing in three months at a rate of 7.85%. On Monday, ICICI Securities was the largest issuer, raising 23 bln rupees through two CPs, both maturing in three months, at 7.76% and 7.765%.  

Rates on three-month CPs issued by non-banking finance companies and manufacturing companies were flat at 7.60-7.80 and 7.25-7.45%, respectively. 

--Primary market

* Tata Capital, Godrej Properties, Toyota Finance, Shriram Finance, Aditya Birla Money, Motilal Oswal Financial Services, Mahindra & Mahindra Financial Services, and SBICAP Securities raised funds through CP.

* Punjab & Sind Bank, Canara Bank, HDFC Bank, and State Bank of India raised funds via CDs.

--Secondary market

* HDFC Bank's CD maturing on Wednesday was dealt 15 times at a weighted average yield of 6.4616%.

* National Bank for Agriculture and Rural Development's CP maturing on Wednesday was dealt 14 times at a weighted average yield of 6.4616%.

At 1700 IST, the following were the volumes, in bln rupees, in the secondary market for short-term debt, as detailed by Clearing Corp of India's F-TRAC platform:

End

Edited by Saji George Titus

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