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Informist, Friday, Feb. 14, 2025

By Siddhi Chauhan

MUMBAI – Borrowing through commercial papers and certificates of deposits remained muted on Friday as high rates held back issuers, dealers said. Investors sold papers nearing maturity in the secondary market due to lack of heavy traction in the primary market, dealers said.

Aditya Birla Money was the only issuer of commercial papers. The company raised INR 1 billion through a three-month paper at 8.08%. On Thursday, CPs to the tune of INR 18.50 billion had been issued, Bajaj Finance alone raising INR 12.00 billion through a three-month paper at 7.72%.

Issuances of certificates of deposit fell marginally to INR 4 billion from INR 5 billion on Thursday. National Bank for Agriculture and Rural Development was the sole issuer of CDs. It raised the said amount through one-year paper at 7.60%. 

"Many deals were open in the primary market but couldn't be executed due to a mismatch in desired rates. While investors wanted to lock in higher rates, issuers wanted to stick to lower rates," a dealer at a brokerage firm said.

Rates on short-term debt remained elevated due to a high liquidity deficit, dealers said. Liquidity in the banking system has been in deficit since mid-December, with market participants attributing the tightness to the Reserve Bank of India's spot dollar sales in order to soften the rupee's depreciation. The RBI's daily net liquidity injections – a proxy for the systemic liquidity deficit – remained over INR 2.00 trillion for more than half of January.

Although the RBI has implemented liquidity addressing measures such as bond purchases under open market operations and daily variable rate repo auctions, liquidity crunch in the system remains high. On Thursday, the net liquidity injected by the RBI--a proxy for the systemic liquidity deficit--rose to INR 2.42 trillion from INR 2.07 trillion on Wednesday.

According to market participants, the Indian central bank has likely sold nearly $20 billion in the spot market this week--draining close to INR 1.75 trillion of rupee liquidity--to prop up the rupee.

On Friday the rates on three-month CDs were quoted at 7.40-7.45%. Rates on three-month CPs issued by manufacturing companies on Friday were around Thursday's levels of 7.50-7.55%. Rates on three-month CPs issued by non-banking financial companies were also unchanged at 7.75-7.80%.

With activity in the primary market subdued, volume in the secondary market picked up, dealers said. "The volume in the primary market was quite dull today so investors were selling their near term maturity papers in order to buy longer term papers," a dealer at another brokerage firm said.

--Primary market

* NABARD raised funds through CDs.

* Aditya Birla Money raised funds through CPs.

--Secondary market

* HDFC Bank's CD maturing on Feb. 20 was traded four times at a weighted average yield of 6.9002%.

* Reliance Retail Ventures' CP maturing on Feb. 18 was traded nine times at a weighted average yield of 6.9611%.

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 Ashish Shirke

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