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Informist, Thursday, Jan. 30, 2025

By Sachi Pandey

MUMBAI – Issuances of certificates of deposit surged Thursday due to banks' need for funds in view of the large number of papers set to mature this month, dealers said. Banks raised a total of INR 150.50 billion through CDs on Thursday, up from INR 82.50 billion Wednesday. Axis Bank was the largest issuer, raising INR 40.00 billion through three-month papers at 7.50%. Canara Bank and Bank of India raised INR 30.00 billion each through one-year papers, while IDBI Bank raised INR 33.00 billion.

In contrast, CP issuances fell to INR 15.50 billion from INR 28.75 billion on Wednesday, with dealers saying companies were waiting for borrowing costs to fall further. "See, banks are coming because they have to roll over their maturities," a dealer at a large-sized brokerage firm said. "But NBFCs (non-banking financial companies) and manufacturing companies are waiting for rates to come down further, which it will by mid-February. So even if they have maturities, they are redeeming it and will probably come with fresh issuances once rates are down," the dealer added.

After falling for two consecutive days, rates remained steady in the short-term debt market on Thursday. Rates on three-month CDs were quoted at 7.47-7.52%. Meanwhile, rates on three-month CPs issued by non-bank lenders were at 7.82-7.87%, with the indicative levels for manufacturing companies' three-month papers at 7.52-7.57%, unchanged from Wednesday.

Market experts expect systemic liquidity to remain in deficit until March despite the recent measures announced by the Reserve Bank of India. "It is good that the RBI is coming with all these liquidity measures, otherwise it would have been very difficult," a fund manager added.

Amid continued tightening of financial conditions, the RBI late Monday announced plans to inject up to INR 1.5 trillion of liquidity by the third week of February, starting with Thursday's open market purchase of gilts where the central bank bought INR 200.20 billion of central government securities. Market participants expect short-term debt rates to fall on Friday in response to this purchase.

--Primary market

* Punjab & Sind Bank, Bank of India, Axis Bank, Indian Bank, IDBI Bank, and Canara Bank raised funds through CDs.

* HDB Financial Services, ICICI Securities, Kotak Securities, and Birla Group Holdings raised funds through CP.

--Secondary market

* Kotak Mahindra Bank's CD maturing on Jun. 11 was traded four times at a weighted average yield of 7.6401%.
* Reliance Industries' CP maturing on Monday was traded twice at a weighted average yield of 7.3798%.

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 Saji George Titus

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