More Stories

Informist, Tuesday, Dec. 24, 2024

By Siddhi Chauhan and Kabir Sharma

MUMBAI – Rates on certificates of deposits rose on Tuesday as the liquidity deficit in the banking system widened to a near-seven-month high, dealers said. The widening of the deficit led banks to issue more certificates of deposit to raise funds, pushing up rates and volume in the market, they added.

Rates on certificates of deposit maturing in three months issued by banks rose around 10 basis points from Monday to 7.40-7.45%. However, rates on similar-maturity commercial papers issued by non-banking finance companies were unchanged at 7.35-7.40%.

"Borrowing through CD has risen due to a sharp rise in liquidity deficit after goods and services outflows," a dealer at a brokerage firm said. "The need for funds has resulted in CD rates also to shoot up."

According to data on the Reserve Bank of India's website, the liquidity deficit widened to INR 2.43 trillion on Monday from INR 1.76 trillion on Friday. The liquidity deficit rose to the highest level seen since May. 21 due to outflows for goods and services tax, which drained INR 1.5 trillion-1.75 trillion from the banking system, dealers said. 

On Tuesday banks raised INR 65 billion through CDs, sharply up from INR 12 billion raised on Monday. Punjab National Bank was the largest issuer, raising INR 50 billion via a three-month paper at 7.45%. HDFC Bank raised INR 15 billion via one-year paper at 7.68%. 

Issuances through commercial papers also rose to INR 18 billion on Tuesday against just INR 5 billion on Monday. Maturities of paper and demand due to the month end led non-banking financial companies, manufacturing companies and housing finance companies to tap the bond market, dealers said. 

"This month is pretty heavy on maturities. On top of that, this was the quarter-end, so demand from companies is generally firm during this time," a dealer at a brokerage firm said. 

On Tuesday, the Export and Import Bank of India was the largest issuer of CPs, raising INR 8.5 billion through one-month paper at a rate of 7.50%. Canfin Homes was also a big borrower, raising INR 6 billion through two papers -- one maturing towards March end and the other in three months, at a rate of 7.25% and 7.55%, respectively. 

Birla Group Holdings and IGH Holdings were the other issuers who tapped the short-term debt market. On Monday, LIC Housing Finance was the sole issuer, borrowing INR 5 billion through a paper that will be redeemed in October at a coupon of 7.75%.

Rates on the three-month commercial paper issued by manufacturing companies were in a range of 7.35-7.40%, unchanged from Tuesday. Rates on similar-maturity commercial paper issued by non-banking finance companies were also unchanged at Monday's level of 7.50-7.55%.

--Primary market

* HDFC Bank and Punjab National Bank raised funds through CDs.

* Export-Import Bank of India, Can Fin Homes, Birla Group Holdings and IGH Holding raised funds through CPs.

--Secondary market

* Axis Bank's CD maturing on Dec. 26 was dealt eight times at a weighted average yield of 6.7069%.
* National Bank for Agriculture and Rural Development's CP maturing on Jan. 1 was dealt once at a weighted average yield of 7.4002%.

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:

NOTE: Details of the deals have been received from market sources.

End

Edited by Deepshikha Bhardwaj

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.