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Informist, Friday, Dec. 6, 2024

By Siddhi Chauhan, and Vidhushi RajPurohit

MUMBAI – Rates on short-term debt papers fell by 5-10 basis points due to expectation of an improvement in liquidity conditions as the Reserve Bank of India slashed the cash reserve ratio by 50 bps at its monetary policy review Friday, dealers said. The cut will be in two equal tranches, with the first from the fortnight of Dec. 14 and the second from Dec. 28. 

Following the reduction in cash reserve ratio, rates on three-month certificates of deposit fell to 7.10-7.15% from 7.18-7.23% on Thursday. Meanwhile, rates on three-month commercial papers issued by non-banking financial companies fell to 7.45-7.50% from 7.50-7.60% in the previous session, and those issued by manufacturing companies fell to 7.15-7.20% from 7.25-7.30%.

Easing of borrowing rates and large redemption needs for December pushed up the issuance of debt papers, dealers said. On Friday, the total amount raised through CPs was at INR 115.5 billion, sharply higher than INR 14.5 billion raised on Thursday. Fund houses were seen absorbing the high issuances. "Mutual funds are actively buying as they expect the rates to fall further in the coming week," a dealer with a brokerage firm said.

Reliance Jio was the largest issuer of CPs for the day, raising INR 40 billion at 7.12% through a three-month paper. The other big issuers were Export-Import Bank of India and ICICI Securities, which cumulatively raised INR 4.5 billion through a three-month papers. Export-Import Bank of India borrowed INR 25 billion at 7.14%, while ICICI Securities raised INR 20 billion at 7.36%.

Banks also increased their borrowing through CDs due to lucrative rates, dealers said. The total amount raised through CDs on Friday was INR 48.5 billion, up from INR 12.5 billion on Thursday. "The rates of CD have cooled down significantly after the CRR cut and banks also have funding needs for the quarter-end requirements," a dealer with a state-owned bank said. "Issuances generally tend to pick up in December owing to both the year-end and the large maturity figure." So far, the redemption amount for December stands at INR 1.46 trillion for CPs, while for CDs, the redemption figure for December amounts to 1.47 trillion.

Bank of India and Bank of Baroda were the largest CD issuers for the day, raising INR 15 billion each. Bank of India borrowed the amount at 7.13% through a three-month paper, while Bank of Baroda issued a six-month paper at 7.35% to raise the sum. 

--Primary market

* Bank of India, Bank of Baroda, Punjab National Bank and Indian Bank raised funds through CDs.

* Reliance Jio Infocomm, Export-Import Bank of India, Godrej Properties, Tata Captial, ICICI Securities, Poonawalla Fincorp and Motilal Oswal Financial Services raised funds through CPs.

--Secondary market

* State Bank of India's CD maturing on Dec. 12 was dealt four times at a weighted average yield of 6.9239%.
* Reliance Jio Infocomm' CP maturing on Dec. 9 was dealt seven times at a weighted average yield of 6.6573%.

At 1700 IST, 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 Avishek Dutta

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