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Informist, Monday, Oct. 21, 2024

By Vidhushi RajPurohit 

MUMBAI – The muted spell on banks' issuance of certificates of deposit lifted Monday, with Bank of Baroda tapping the short-term debt market to raise INR 3 billion at 7.40%. The issuer raised the amount by issuing a paper which is due for maturity in May. Two banks tapped the CD market on Oct. 14, and since then, no other bank had tapped the CD market. Thursday, Small Industries Development Bank of India issued a one-year CD and raised INR 23 billion at 7.58%. 

No other CDs were issued as most banks do not have a pressing need to borrow, dealers said. "Ten days are left in October, so most likely the CDs issued this month will likely stay in the same range with some minor movement," a dealer with a private bank said. Market participants said it is a cyclic movement for the issuances of CDs to go down at the start of a new quarter due to reduced demand after a surge of issuances observed in the quarter-end period. 

High surplus liquidity in the banking system and the lower amount of maturing CDs in October are also some reasons cited by the market participants for the tepid issuances of CDs. Sunday, the surplus liquidity was at INR 1.52 trillion. The amount of CDs maturing in October is at INR 649.80 billion. "Rolling over is one of the reasons for issuing CDs, but there are instances of fresh demand or, in some cases, low demand that also directs the issuances," a dealer with a state-owned bank said. The rates on three-month CDs were at the same level as on Friday, 7.15%-7.20%.

Of the total CDs maturating in October, Punjab National Bank had the largest redeeming amount at INR 195.25 billion and so far it has issued paper totalling INR 171 billion. Meanwhile, Bank of Baroda has already exceeded its maturity amount by issuing CDs totalling INR 114.50 billion, against the maturity amount of INR 44 billion.

The issuance of commercial papers picked up as the total issuances were INR 19.5 billion, against INR 9 billion on Friday. Larsen & Toubro was the largest issuer as it borrowed INR 7.5 billion at 7.11% with a paper maturing on Dec. 26. HDFC securities raised INR 6 billion from a three-month paper at 7.65%. Mahindra and Mahindra Financial Services and HDB Financial Services issued three-month paper and each borrowed INR 2 billion at 7.45%. The remaining INR 2 billion was raised by Sundaram Finance at 7.43% from a three-month paper.

Despite the rise in CP issuances, the rates remained steady due to firm demand from mutual funds, dealers said. Dealers said that mutual funds, on account of comfortable funds with them, are readily absorbing the issuances. The rates on three-month papers issued by non-banking financial companies were quoted at 7.45-7.50% on Monday, unchanged from the previous day. The rates on papers of similar maturity issued by manufacturing companies were also unchanged at 7.20-7.25%. "The rates are not moving much as the issuances have been infrequent and easily absorbed by mutual funds, so even when the rates move up after a big ticket issuance they again tend to settle around the same level," a dealer with a brokerage firm said.

--Primary market

* Bank of Baroda raised funds through CDs.

* HDFC Securities, Larsen and Toubro, Mahindra and Mahindra Financial Services, HDB Financial Services, and Sundaram Finance raised funds through CPs.

--Secondary market

* HDFC Bank's CD maturing Nov. 21 was dealt three times at a weighted average yield of 7.0273%.
* Export Import Bank of India's CP maturing Oct. 22 was dealt seven times at a weighted average yield of 6.4616%.

At 1630 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 Manisha Baxla

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