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Informist, Monday, Jan. 27, 2025

By Sachi Pandey 

MUMBAI - After a brief lull, Monday saw three banks tapping the short-term debt market to raise funds through certificates of deposit, dealers said, with Union Bank of India, Kotak Mahindra Bank, and Bank of Baroda cumulatively raising INR 53.00 billion. Union Bank was the biggest issuer, raising INR 20.00 billion through papers maturing in one year at 7.65%, while Bank of Baroda issued a three-month paper, raising INR 18.00 billion at 7.54%.

Market participants attributed the fundraising to cash-flow management and meeting maturity obligations. "The banks raised (funds) only because they had rollovers and maturities, so they had to manage cash flow. Otherwise, if you see, the supply is very limited currently as liquidity is still a concern and rates remain high," a dealer at a large public sector bank said.

The banking system has been plagued by tight liquidity for several weeks now, with net liquidity injected by the Reserve Bank of India on Sunday--a proxy for systemic liquidity conditions--rising to INR 3.13 trillion. On Monday, the central bank finally took substantial measures to relax the tight financial conditions caused by its dollar sales in defence of the rupee, announcing open market purchase of bonds to the tune of INR 600.00 billion by Feb. 20, a dollar/rupee buy/sell swap auction for $5 billion, and a 56-day variable rate repo auction for INR 500 billion on Feb. 7, the day the Monetary Policy Committee will announce its next interest rate decision. The MPC has left the repo rate unchanged at 6.50% for two years but is expected to finally lower it next month.

On Monday, rates on three-month CDs were quoted at 7.55-7.60%, while those on three-month commercial papers issued by non-banking financial companies were quoted at 7.95-8.00%. Manufacturing companies' three-month papers were quoted at 7.60-7.65%, unchanged from Friday.

Meanwhile, issuances via commercial papers slipped Monday, with companies and non-banking financial companies raising INR 15.50 billion through three-month papers, down from INR 31.40 billion Friday. The National Bank for Agriculture and Rural Development was the major issuer of CPs on Monday, raising INR 8.00 billion at 7.60%.

--Primary market

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

* Bank of Baroda, Kotak Mahindra Bank, and Union Bank of India raised funds through CDs.

--Secondary market

* Punjab National Bank's CD maturing on Feb. 11 was traded thrice at a weighted average yield of 7.3622%.
* Reliance Industries' CP maturing on Feb. 3 was traded once at 7.4619%.

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 Vandana Hingorani

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