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Informist, Friday, Oct. 18, 2024

By Vidhushi RajPurohit

MUMBAI – The issuance of certificates of deposit was again muted, after Thursday's big ticket issuance by the sole issuer, Small Industries Development Bank of India. "The issuance of CDs is based on banks' funding needs and the demand for funds is up when there is a need to refinance the maturing papers," a dealer with a private bank said. CDs worth INR 649.80 billion are maturing in October and banks have issued a total of INR 479.45 billion so far in the month. 

Market participants also attributed the subdued CD issuances to the reduction in demand typically observed at the start of every new quarter. "It is usual for banks' borrowing to drop at the start of the quarter due to low funding needs," a dealer with a state-owned bank said. "The demand is up in the quarter-end period as there are more outflows on account of interest payments." In September, banks raised CDs worth INR 1.45 trillion. 

Some dealers also cited the high surplus liquidity and the inflow from the buyback of gilts for low CD issuances. The government bought back INR 493.87 billion worth of gilts maturing in 2025-26 (Apr-Mar) in the last two weeks. On Thursday, the liquidity surplus in the banking system was INR 1.75 trillion. 

The issuance of commercial papers was also down from Thursday. Companies raised INR 9 billion through CPs on Friday, down from INR 30 billion on Thursday. Godrej & Boyce was the largest issuer, raising INR 7 billion from a three-month CP at 7.29%. Tata Projects raised INR 2 billion through a three-month paper at 7.38%.

The rates on three-month papers issued by non-banking financial companies were quoted at 7.45-7.50% on Friday, unchanged from the previous day. The rates on papers of similar maturity issued by manufacturing companies were also unchanged at 7.20-7.25%. "This month, there is an overall less demand from the issuers' side as the redemption amount was lower than the previous month," a dealer at a mutual fund said. 

So far, companies have issued CPs totalling INR 557.11 billion compared with INR 624.43 billion due for redemption in October. Market participants expect the CP issuances to increase in November-December as companies will likely tap the market to meet the funding requirements in the festive months. Issuances in the CP market are also expected to increase as companies will need funds to refinance their maturing papers for the Oct-Dec quarter. As of now, the amount due for redemption for the quarter ending December stands at INR 3.06 trillion. 

--Primary market

* Tata Projects and Godrej & Boyce raised funds through CPs.

--Secondary market

* National Bank for Agriculture and Rural Development's CD maturing Jan. 17 was dealt ten times at a weighted average yield of 7.1999%.
* ONGC Petro Additions' CP maturing Oct. 21 was dealt three times at a weighted average yield of 6.4274%.

At 1700 IST, the following were the volumes, in INR billion, 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 Saji George Titus

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