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Informist, Tuesday, Oct. 1, 2024

By Vidhushi RajPurohit and Richard Fargose

MUMBAI – Issuances of certificates of deposit and commercial paper were subdued as both banks and companies stayed on the sidelines Tuesday owing to lack of funding requirements, dealers said. "The new quarter has just begun, so issuances will likely stay muted for a few more days," a dealer with a mutual fund said. "Last month most participants, especially banks, met their refinancing needs."

In September, banks met their financing needs by issuing CDs adding up to INR 1.45 trillion against CDs due to mature, which total INR 1.09 trillion. Market participants are of the view that the coming months will see a surge in CD issuances as banks will tap the short-term debt market to raise funds to meet their credit demand. In a webinar Tuesday, rating agency ICRA attributed the rise in CD issuances to the unwillingness of banks to increase rates on retail term deposits, preferring instead to tap CDs and infrastructure bonds to meet their funding requirements.

On Tuesday, Federal Bank and AU Small Finance Bank raised a total of INR 7.25 billion through CDs. The amount was sharply lower than INR 68.00 billion raised by banks Monday. Federal Bank raised INR 5.00 billion through a one-month CD at 7.15%. AU Small Finance Bank issued a one-year CP at 7.98% and raised INR 2.25 billion.

Rates on three-month CDs were quoted at 7.20-7.25%, unchanged from Monday. Meanwhile, the rates on three-month CP were up 5 basis points on account of lack of big-ticket issuances, dealers said. CP issued by non-banking finance companies of three-month maturity were at 7.60-7.65%, down from 7.50-7.55% Monday. Paper of similar maturity by manufacturing companies were at 7.30-7.35%, against 7.25-7.30% Monday.

Two companies tapped the CP market Tuesday, against five on Monday, and raised INR 8.7 billion. Aditya Birla Finance was the biggest issuer, borrowing INR 7.25 billion at 7.49% by issuing a paper maturing on Dec. 24. Aditya Birla Housing Finance issued paper maturing Dec. 26 and borrowed INR 1.5 billion at 7.20%.

Volumes in the secondary market were higher than on Monday, as mutual funds are no longer facing quarter-end redemption pressure, dealers said. Volumes in the CD market were at INR 41.50 billion, against INR 20.00 billion on Monday. In the CP market, the volume was at INR 9.20 billion, against INR 6.00 billion previously.

--Primary market

* AU Small Finance Bank and Federal Bank raised funds through CDs.

* Aditya Birla Housing Finance and Aditya Birla Finance raised funds through CP.

--Secondary market

* Punjab National Bank's CD maturing Oct. 3 was dealt five times at a weighted average yield of 6.4445%.
* LIC Housing Finance's CP maturing Dec. 17 was dealt two times at a weighted average yield of 7.1600%.

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

NOTE: Details of the deals have been received from market sources.

End

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

Edited by Rajeev Pai

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