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Informist, Monday, Dec. 9, 2024

By Kabir Sharma

MUMBAI – Issuances in the short-term debt market fell sharply on Monday, dealers said, on expectations that the addition of over INR 1 trillion to systemic liquidity in the coming weeks, following the reduction in the cash reserve ratio announced by the Reserve Bank of India Friday, will lead to lower interest rates. HDFC Bank was the sole issuer of certificates of deposit on Monday, raising INR 20.00 billion at 7.15%. On Friday, CDs worth INR 48.50 billion were issued.

"There will be a good amount of money coming in when it (CRR cut) actually happens, so rates will fall. Issuers are waiting for that to happen," a dealer at a private bank said. Last week, the Indian central bank announced that the CRR will be lowered by 50 basis points to 4.00% in two equal steps, with a first 25 bps reduction coming into force from Dec. 14 and the next starting Dec. 28. Outgoing Governor Shaktikanta Das said the CRR cut is expected to infuse about INR 1.16 trillion of liquidity into the banking system.

While short-term rates have already fallen by 5-10 bps since the announcement of the CRR cut, market participants see them declining further once liquidity conditions actually improve. This has prompted banks to defer issuances, dealers said.

The trend of low issuances was seen in commercial papers as well Monday. The total amount raised through CPs was INR 50.20 billion, less than half the INR 115.50 billion raised on Friday. Dealers said the fall in CP issuances was also due to a lack of appetite from mutual funds, with only one large mutual fund active in the market since Friday as others are already overloaded with papers. This has led to a fall in demand and hence lower issuances, dealers said.

HDFC Securities Ltd. was the largest issuer of CPs Monday, raising INR 12.00 billion at 7.45% through a three-month paper. The other big issuer was National Bank for Agriculture and Rural Development, which raised INR 10.00 billion through a three-month paper at 7.16%. All CPs issued were for three months, other than Redington Ltd., which raised INR 2.00 billion via CP maturing in one-and-a-half months.

--Primary market

* HDFC Bank raised funds through CDs.

* Redington Ltd, NABARD, Tata Capital Housing, Godrej Properties, Axis Securities, HDFC Securities, SBI Capital Securities, Julius Baer Capital, and ICICI Securities Primary Dealership raised funds through CPs.

--Secondary market

* Indian Bank's CD maturing on Jan. 1 was dealt two times at a weighted average yield of 7.1992%.
* Reliance Retail Ventures' CP maturing on Dec. 23 was dealt four times at a weighted average yield of 7.0007%.

The following were the volumes, in INR billion, in the secondary market for short-term debt at 1700 IST, as detailed by the Clearing Corp. of India's F-TRAC platform:

End

Edited by Deepshikha Bhardwaj

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