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Informist, Wednesday, Mar. 12, 2025

By Siddhi Chauhan

MUMBAI – Short-term debt issuances rose sharply on Wednesday as rates on the three-month short-term debt instrument cooled off slightly, dealers said. Heavy maturities in the month also pushed issuers to borrow heavily, dealers said. Certificates of deposit worth INR 1.64 trillion are due for redemption in March, as against INR 1.36 trillion in February. Similarly, commercial papers worth INR 2.04 trillion are maturing this month, up from INR 1.33 trillion in February. 

On Wednesday, CD issuances jumped to INR 156.25 billion against just INR 6.50 billion on Tuesday, while CP issuances rose to 138.00 billion from 20.85 billion on the previous day. 

Bank of India was the largest CD issuer, raising INR 42.50 billion through one-month and three-month CDs at 7.65% and 7.63%, respectively. Canara Bank raised INR 29.50 billion through three-month and one-year paper at 7.54% and 7.59%. Punjab National Bank raised INR 22.00 billion through a one-month paper at 7.58%. On Tuesday, HDFC Bank was the sole issuer of CDs, raising INR 6.50 billion through a one-year paper at 7.63%. 

Dealers said one-month paper has become lucrative, with Bank of India and Punjab National Bank raising funds through the papers. "Banks expect rates to cool off in April, and we are getting a good level for one month period so it is quite lucrative to raise funds for just one month," a dealer at a state-owned bank said. On the investor side, mutual funds were seen selling papers of shorter duration in the secondary market to invest in the primary market, dealers said. 

The rates on the three-month CDs fell to 7.55-7.65% from 7.57-7.67% on Tuesday as the liquidity deficit in the banking system narrowed sharply, dealers said. According to data from the RBI, the net liquidity injected by the central bank – a proxy for systemic liquidity conditions – reduced to INR 1.05 trillion on Tuesday from INR 1.45 trillion on Monday. The net liquidity injected likely narrowed due to a pick up in government spending, dealers said.

A similar sentiment was seen in the CP segment as companies rushed to take advantage of a easing off in rates ahead of heavy maturites, dealers said. "The demand is rollover based only, since the liquidity eased, the problem of demand supply mismatch also vanished," a dealer at another brokerage firm said. "Yesterday (Tuesday), even though issuers wanted to raise funds, they couldn't do so because of high rates demanded by investors." The rates on three-month CPs of non-banking finance companies fell to 7.82-8.03% from 7.85-8.05% on Tuesday. Rates on CPs issued by manufacturing companies were unchanged at 7.65-7.85% on Wednesday. 

--Primary market

* HDFC Bank, Bank of India, Kotak Mahindra Bank, Bank of Baroda, Canara Bank, Indian Bank, Punjab National Bank and Punjab and Sindh Bank raised funds via CDs.

* Reliance Jio Infocomm, National Bank for Agriculture and Rural Development, ICICI Securities, Kotak Securities, Julius Baer Capital and Bajaj Finance Ltd raised funds via CPs.

--Secondary market

* Punjab National Bank's CD maturing on Thursday was traded 12 times at a weighted average yield of 6.3532%.

* National Bank for Agriculture and Rural Development's CP maturing on Thursday was traded thrice at a weighted average yield of 6.3521%.

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 Saji George Titus

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