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Informist, Friday, Jan. 24, 2025

By Sachi Pandey

MUMBAI – Rates on commercial papers and certificates of deposits rose by 5 basis points on Friday in the primary segment, owing to the systemic liquidity deficit which was the highest in 12 months on Thursday, dealers said. 

Rates on three-month CPs issued by non-banking financial companies were quoted at 7.95-8.00%, up 5 bps as compared to Thursday, and those on three-month papers issued by manufacturing companies were at 7.60-7.65% from 7.55-7.60%. Rates on three-month CDs were also up 5 bps as compared to the previous trading session quoted at 7.55-7.60%. 

"Rates are extremely high, with liquidity going tight. We can see it going up further if it is not addressed by RBI (Reserve Bank of India) in a proper way, VRR (variable rate repo) auctions or CRR (cash reserve ratio) cuts are not going to help any more," a dealer at a mid-sized brokerage firm said. 

On Thursday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--rose to INR 3.16 trillion, the highest level since Jan. 24, 2024, against INR 2.88 trillion on Wednesday.

The week ended with continued low activity with no CDs issued on Friday. "Banks are not ready to raise funds at higher rates. Even if some banks who want funds are putting lower quotes, they are not getting investors. No investor is ready to lock in lower rates even for shorter duration," a dealer at a private bank said. 

In the commercial paper market, however, the fundraising was improved on Friday on the back of rollover demand. "There were few issuers today (Friday) who had January maturities so they had to roll over their papers. Like Chola (Cholamandalam Investment & Finance Co.) raised to rollover, and NABARD (National Bank for Agriculture and Rural Development) also. But overall there was selling pressure because of the liquidity deficit and also month-end pressure, so rates went up. 

NABARD was the major issuer of CPs Friday, raising INR 26.50 billion through papers maturing in three months at a rate of 7.60%. ICICI Securities also raised INR 15 billion through papers maturing in three months at a rate of 8.02%. 

On Thursday, LIC Housing Finance was the largest issuer of CPs, raising INR 14.00 billion through papers maturing in one year at 7.74%.

--Primary market

* Bajaj Finance, ICICI Securities, Axis Securities, NABARD, and Cholamandalam Investment & Finance Co. raised funds through CPs.

* There were no CD issuances.

--Secondary market

* Punjab National Bank's CD maturing on Feb. 4 was traded seven times at a weighted average yield of 7.4152%.
* L&T Metro Rail Hyderabad's CP maturing on Monday was traded twice at a weighted average yield of 6.8050%.

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 Tanima Banerjee

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