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Informist, Tuesday, Nov. 19, 2024

By Vidhushi RajPurohit

MUMBAI – Rates on short-term debt instruments fell marginally Tuesday due to surplus liquidity in the banking system and firm demand from mutual funds, dealers said. The three-month commercial papers issued by manufacturing companies eased to 7.18-7.23% from 7.20-7.25% on Monday. Papers of similar maturity issued by non-banking financial companies were down five basis points at 7.40-7.45%. "The issuances have not been on a regular basis for most of the month, so that and the strong demand from mutual funds, has likely eased down the rates," a fund manager with a brokerage firm said. 

The issuances were scant during the day and mutual funds had funds to deploy owing to low redemption pressures, dealers said. The CP issuances dropped to INR 21.5 billion, from INR 50 billion on Monday. Mahindra and Mahindra Financial Services was the largest issuer, raising INR 18.5 billion through a three-month paper at 7.44%. Motilal Oswal Financial Services was the other issuer, raising INR 3.00 billion through a three-month paper at 7.76%. 

Both the issuances were on account of the redemption needs of the companies, dealers said. Motilal Oswal Financial Services has a redemption of INR 3 billion due on Thursday, while Mahindra and Mahindra Financial Services has redemptions of INR 27.00 billion due in November.  

The certificates of deposit segment saw no bank tapping the market on Tuesday. Even on Monday, Bank of Baroda, which raised INR 3.25 billion from a paper maturing in June at 7.40%, was the lone issuer. Market participants said because of the ample systemic surplus and improved deposit growth, banks are likely to trim down their borrowing from the CD market.

The surplus liquidity in the banking system was at INR 1.69 trillion on Monday. According to data released by the RBI, as of Oct. 18 growth in bank deposits outpaced loan book growth for the first time since April 2022. As of Oct. 18, bank loans grew 11.5% on year compared with deposit growth of 11.7%.

However, market participants also said that the issuances of CDs will likely pick up in December because of quarter-end funding needs and high redemption quantum. So far, the redemption amount for December is estimated at INR 1.47 trillion, against INR 629.45 billion for November. "The improved ratio for credit and deposit growth will surely help banks cut down their borrowings from the CD avenue, but that will be visible only after January when the seasonal demand eases," a dealer with a state-owned bank said. 

--Primary market

* No bank raised funds through CD.

* Motilal Oswal Financial Services and Mahindra and Mahindra Financial Services raised funds through CP.

--Secondary market

* HDFC Bank's CD maturing on Nov 21 was dealt nine times at a weighted average yield of 6.4305%.
* Mahindra and Mahindra Financial Services CP maturing on Nov. 21 was dealt seven times at a weighted average yield of 6.4445%.

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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