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Informist, Thursday, Sep 19, 2024

By Richard Fargose and Vidhushi RajPurohit

MUMBAI – Fundraising through certificates of deposit and commercial paper surged today as banks and non-banking financial companies tapped the short-term debt market to meet their funding requirements, dealers said. 

Today, banks mopped up 81 bln rupees through CDs against 46 bln rupees on Tuesday, while manufacturing companies and non-banking financial institutions raised 68 bln rupees through CPs against 27.75 bln rupees on Tuesday. India's money markets were shut on Wednesday for Id-e-Milad.

Punjab National Bank was the largest issuer today, raising a total of 39 bln rupees through three-month and one-month CDs maturing at coupon of 7.26% and 7.18%, respectively, dealers said. Union Bank and IndusInd bank also tapped the CD market to borrow 10 bln rupees each through three-month papers at 7.27% and 7.31%, respectively. 

Private sector lender, HDFC Bank also raised 17 bln rupees through one-year papers at 7.65%, dealers said.

"Banks were seen participating actively on the borrowing side today through the three-month CDs in order to have adequate funds as the liquidity conditions tightened after the advance tax outflows," a dealer with a state-owned bank said. The systemic liquidity slipped into deficit after the outflow of around 1.25 trln rupees left the banking system as tax payment, dealers said. 

Market participants expect to see further issuance of CDs from the banks because the deposit-credit mismatch remains a concern for the banks as they are not able to pick up their deposit growth to match the pace of their credit growth. 

"Three-months paper is the most attractive tenure for the banks as they expect the RBI to cut domestic interest rates in line with the US federal open market committee's decision," a dealer with a private bank said. On Wednesday, the US Federal Open Market Committee announced a 50 basis point cut in its policy rate.

Rates on CDs maturing in three months were at 7.30-7.35% today.

Funds raised through commercial paper also picked up today as borrowers tapped the market actively after the holiday for Id-e-Milad on Wednesday, dealers said. ICICI Securities was the largest issuer of CP today, borrowing 18 bln rupees through three-month CP at 7.75%. Aditya Birla Housing, Godrej Agrovet, Godrej Properties, HDFC Securities, Poonawala Fincorp, Axis Securities were some of the other issuers. "Mutual funds were also actively investing in the debt papers as they have sufficient funds with them to absorb the supply," a dealer with a brokerage firm 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 Properties, HDFC Securities, Poonawala Fincorp, Axis Securities, Aditya Birla Housing, Godrej Agrovet, ICICI Securities, Kotak Securities, Motilal Oswal Financial Services, Tata Motor Finance, Larsen & Tourbo Ltd and Aditya Birla Money raised funds through CPs.

* Punjab National Bank, Union Bank, HDFC Bank, Indusind Bank and Bank of Maharashtra raised funds via CDs today.

--Secondary market

* Small Industries Development Bank of India's CD maturing Dec 18 was dealt six times at a weighted average yield of 7.2717%.

* Reliance Industries' CP maturing on Sep 23 was dealt five times at a weighted average yield of 7.0454%.

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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