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Informist, Friday, Dec. 13, 2024

By Siddhi Chauhan

MUMBAI – Issuances of certificates of deposits rose on Friday due to improved demand for funds from banks ahead of upcoming redemptions, dealers said. On Friday, banks raised INR 26 billion through certificates of deposit against INR 5 billion on the previous trading day.  

"Many CDs are set to mature in December, this is the reason why CD issuance was slightly higher today (Friday)," a dealer at a state-owned bank said. "Even though CD issuances have risen today, it has been tepid this week as many mutual funds are seeing redemption pressures due to heavy outflows this month."

Many investors, mainly mutual funds, refrained from buying heavily in the primary market because of redemption pressure on account of advance tax outflows, dealers said. Advance tax outflows, which started from Friday, are expected to drain around INR 1.25 trillion-INR 1.50 trillion from the banking system, dealers said.  

On Friday, Bank of India was the largest issuer, raising INR 11 billion through CDs maturing in three months at a rate of 7.23%. Canara Bank raised INR 10 billion through CDs maturing in May 2025 at a rate of 7.52%. On Thursday, Canara Bank was the sole issuer of CDs, raising INR 5 billion through paper maturing in one year at 7.52%. HDFC Bank raised INR 5 billion on Friday through CDs maturing in three months at 7.18%.

Commercial paper issuances continued to be muted with INR 1 billion raised, as against INR 3 billion on the previous day. The amount raised in the last two days was sharply lower than the average of the CPs issued during the week. According to the data compiled by Informist, the average amount of CP issued by non-banking financial institutions, manufacturing companies and housing finance this week was INR 38.18 billion. 

On Friday, ICICI Securities was the sole issuer of CPs, raising INR 1 billion through papers maturing in three months at a rate of 7.48%.

"Not many offers were dealt today because mutual funds are facing redemption pressures," a dealer at a brokerage firm said. "This is why they prefer to sell paper in the secondary market at a higher rate." 

Going forward, rates are expected to see a rise as issuers may tap the short term debt market in order to finance the upcoming maturity, dealers said.

On Friday, rates on CP issued by manufacturing companies with three-month maturity were quoted at 7.20-7.25%, unchanged from the previous close. Rates of papers of similar maturity issued by non-banking financial entities settled at 7.40-7.45%, unchanged from the previous day. Rates on three-month CDs also remained unchanged at 7.15-7.20%.

--Primary market

* Canara Bank, Bank of India and HDFC Bank raised funds through CD.

* ICICI Securities raised funds through CP.

* Axis Bank's CD maturing on Dec. 26 was dealt thrice times at a weighted average yield of 7.1424%.
* National Bank for Agriculture and Rural Development's CP maturing on Jan. 1 was dealt four times at a weighted average yield of 7.3007%.

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

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Saji George Titus

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