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Informist, Tuesday, Mar. 4, 2025

By Kabir Sharma

MUMBAI – Issuances in the short-term debt market surged Tuesday as banks rushed to meet credit demand and to roll over papers that are maturing, dealers said. The rise in issuances kept rates on certificates of deposit and commercial papers firm despite liquidity deficit easing. Banks raised INR 124.00 billion through CDs, against INR 87.00 billion raised on Monday.

"Rates are slightly up because year-end means everyone is on borrowing side. Banks particularly have more credit offtake in March and there is so much rollover demand as well," a dealer at a state-owned bank said. "Liquidity has improved but there are outflows also lined up, so issuances won't drop this month."

Union Bank of India was the largest issuer of CDs. It raised INR 53 billion through three-month papers at 7.53%. Rates on three-month papers remained in the range of 7.45%-7.65%. Rates are expected to cool down going forward as liquidity will improve further due to inflows on account of the Reserve Bank of India's $10.06 billion dollar/rupee swap, which will be settled Tuesday.

"This long swap deal of RBI should have a cascading impact on money market. Corporate bond yields and CD were elevated. The spread between a repo rate and a Corporate Bond yield was as much as 125 basis point northwards over the repo rate, while buying activity in secondary market had also been under pressure...the present swap will ensure transition to money market yields," Soumya Kanti Ghosh, State Bank of India's group chief economic adviser, said in a report Tuesday.

Companies raised a total of INR 104.00 billion through CPs compared to a mere INR 9.00 billion on Monday. Small Industries Development Bank of India was the largest issuer of CPs on Tuesday. The company raised INR 67 billion through CPs maturing in three months at 7.59%.

Dealers said rates and issuances from non-bank finance companies are expected to remain on the higher side due to expectations of better credit offtake during the month. Rates on three-month CPs of non-bank financial companies were in the range of 7.90-8.10%, while those of manufacturing companies were in the range of 7.60-7.80%.

--Primary market

* Union Bank of India, Bank of Baroda, Punjab and Sind Bank, Indian Bank, and Axis Bank raised funds via CDs.

* Axis Securities, Small Industries Development Bank of India, Bajaj Finance, HDFC Securities, Kotak Securities, HSBC InvestDirect Financial Services, Hero Fincorp, Aditya Birla Money, and Motilal Oswal Financial Services raised funds through CPs.

--Secondary market

* Union Bank of India's CD maturing on Wednesday was traded six times at a weighted average yield of 6.1098%.

* National Bank for Agriculture and Rural Development's CP maturing on Mar. 12 was traded three times at a weighted average yield of 6.6984%.

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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