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Informist, Thursday, Nov. 14, 2024

By Siddhi Chauhan

MUMBAI – For the third time this week, short-term debt issuances were dominated by companies and non-banking financial institutions as banks refrained from tapping the short-term debt market, dealers said. 

Borrowings through certificates of deposits, which were already quite low this week, remained muted ahead of an extended weekend, dealers said. Financial markets are shut on Friday on account of Guru Nanak Jayanti. This week, banks borrowed only INR 25 billion through short-term debt against INR 169 billion in the week ended Friday.

Government bond redemptions of around INR 1.5 trillion in two weeks have already left the banking system flush with liquidity. With banks not in the need to tap the market for funds, rates on CDs for three-month tenure have remained unchanged at 7.15-7.20%, dealers said.

According to data from the Reserve Bank of India's website, the liquidity surplus in the banking system on Wednesday was at INR 2.12 trillion, slightly higher than INR 2.05 trillion on Tuesday. Even though banks refrained from issuing CDs in the primary market, the volumes in the secondary market were robust, dealers said.

"What is the need to raise funds when we already have a comfortable amount of liquidity available? CD issuances may increase at the time of payment of advance tax, before that CD borrowings will remain tepid," a dealer at a state-owned bank said. "Although we are seeing a good amount of trade in the secondary market."

Issuances through commercial papers fell slightly in comparison to the previous day ahead of the long weekend, dealers said. Many companies and non-banking financial institutions did not tap the market as they had already fulfilled their requirement for funds last week, dealers said.

Issuances through CPs fell marginally to INR 39.3 billion from INR 44 billion on Wednesday. Till Wednesday, INR 101.25 billion was raised through CPs. The amount of CPs coming up for redemption in November is INR 1.13 trillion. 

"Many issuers have already met their fund requirements at the start of the week," a dealer at a brokerage fund said. "Nobody would want to issue ahead of a long weekend, right?"

Larsen and Toubro was the largest issuer of CPs on Thursday, raising INR 20 bln rupees at a rate of 7.18% for three months, followed by L&T Finance which raised around INR 13.5 billion through CPs maturing six months and the other in November at rates of 7.65% and 7.25%, respectively.

The rates on CPs issued by manufacturing companies were at Wednesday'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 the previous day's close.

--Primary market

* No bank raised funds through CD.

* Larsen and Toubro, L&T Finance, Godrej Industries, and Tata Capital raised funds through CPs.

--Secondary market

* Punjab and Sind Bank's CD maturing on Jan. 23 2025 was dealt twice at a weighted average yield of 7.1999%.
* Reliance Jio Infocomm Ltd. CP maturing on Nov. 25 was dealt four times at a weighted average yield of 6.8995%.

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.

Edited by Tanima Banerjee

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