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Informist, Wednesday, Nov. 13, 2024

By Vidhushi RajPurohit

MUMBAI – The activity in the short-term debt market was driven by borrowings from companies, while banks remained away from the debt market. Even on Tuesday, only one bank, Punjab National Bank, issued a certificate of deposit amounting to INR 25 billion at 7.18%. The muted issuance from banks was on account of ample surplus in the banking system and low rollover demand, dealers said. Total CD maturity for November amounts to INR 629.45 billion, and so far this month banks have already issued CDs totalling INR 310 billion.

Market participants said new issuances of CDs will likely moderate this month as banks are going slower on their credit disbursals. "CD issuances will most likely be based on the refinancing needs, with fewer fresh issuances as the banks will try to limit the borrowings if they are working towards slowing their advances," a dealer with a state-owned bank said. The high systemic surplus is also keeping most banks at bay. On Tuesday, the surplus liquidity was at INR 2.05 trillion. On account of hushed activity, the rates on the certificates of deposit for three-month tenure were unchanged at 7.15-7.20%.

Meanwhile, the issuances in the commercial paper segment remained robust with companies actively borrowing funds from the debt market. Issuances of commercial paper were at INR 44 billion, against INR 51.75 billion on Tuesday. "For companies, borrowing from banks has become expensive because of the increased marginal cost of lending rates as banks try to slow their credit growth," a fund manager with a mutual fund said. "So, companies are more active in the CP market." Market participants also sad that the high redemption amount for November is also keeping most companies on their toes. The CP redeeming in November stands at INR 1.13 trillion. 

Export-Import Bank was the largest issuer, raising INR 25 billion through a one-year paper at 7.53%. The other big issuer was National Bank for Agriculture and Rural Development, raising INR 10 billion by issuing a three-month paper at 7.16%. L&T Finance also issued a three-month paper at 7.43% raise INR 6 billion. The remaining INR 3 billion was raised by Sundaram Finance through a one-year paper at 7.70%.  

Despite large issuances, the rates on CPs stayed flat. "The issuances are easily subscribed by the mutual funds as there is no redemption pressure for now, so the rates remain at the same level," a fixed income dealer at a brokerage said. "Redemption pressure is usually faced by the funds houses towards month-end." The rates on CPs issued by manufacturing companies were at Tuesday's level of 7.20-7.25%. Papers of similar maturity issued by non-banking financial companies were quoted at 7.45-7.50%, unchanged from Tuesday's close.

--Primary market

* No bank raised funds through CD.

* Export-Import Bank, Sundaram Finance, National Bank for Agriculture and Rural Development and L&T Finance raised funds through CP.

--Secondary market

* HDFC Bank's CD maturing on Nov. 21 was dealt one time at a weighted average yield of 6.8678%.
* HDFC Securities' CP maturing on Nov. 14 was dealt one time at a weighted average yield of 6.3156%.

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 Vidhi Verma

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