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Informist, Tuesday, Mar. 18, 2025

By Kabir Sharma and Siddhi Chauhan

MUMBAI – Issuances in the short-term debt market rose on Tuesday on the back of maturities, market participants said. A widening of the banking system liquidity deficit also led to increased issuances, they said. On Tuesday, banks borrowed INR 103 billion through certificates of deposits against INR 87 billion on Monday and companies borrowed INR 72 billion through commercial papers, sharply up from INR 16.25 billion on the previous day. 

"In this quarter, issuances are generally high because of high redemption and credit offtake," a dealer at a state-owned bank said. "Some issuers also raising funds as they expect a rise in rates going forward as the deficit is expected to widen due to GST (goods and services tax) outflows." 

As per Reserve Bank of India's data, net liquidity injected rose to 2.43 trillion on Monday--the highest since Jan. 29. In the coming days, outflows for goods and services tax payments will weigh on liquidity, dealers said, although the infusion of durable liquidity by the RBI will limit the upward pressure on borrowing rates. Outflows for goods and services, which will likely begin from Friday, are expected to drain around INR 1.5 trillion to INR 2 trillion, dealers said. On Monday, the RBI will hold a dollar/rupee buy/sell swap auction for $10 billion. The central bank will also purchase INR 500.00 billion of government bonds through an open market auction next Tuesday.

The outflows are expected to put pressure on borrowing costs of short-term debt instruments prompting issuers to raise funds while the rates are comparatively cheaper, dealers said. 

On Tuesday, Punjab National Bank was the largest issuer raising INR 65 billion through three-month and one-year CDs at 7.56% and 7.57% respectively. HDFC Bank and Bank of Baroda raised INR 20 billion each through three-month CDs at 7.58% and 7.55%, respectively. On Monday, Canara Bank was the largest CD issuer raising INR 40 billion through a three-month paper at 7.55%.

The situation was similar in the CP market, as issuers rushed to raise funds ahead of the upcoming maturities, dealers said. Bajaj Financial Securities was the largest CP issuer raising INR 11.50 billion through a three-month paper at 7.91%. LIC Housing Finance raised INR 10 billion through a one-year paper at 7.65%. On Monday,  Kotak Securities was the largest CP issuer, raising INR 7 billion through a three-month paper at 7.93%.

Despite high issuances, rates on the three-month CDs remained unchanged at 7.55-7.65% on Tuesday. Rates on three-month CP of non-banking finance companies were also unchanged from the previous day at 7.82-8.03%. Rates on CP issued by manufacturing companies were at 7.65-7.85%.

--Primary market

* HDFC Bank, Bank of Baroda, and Punjab National Bank raised funds via CDs.

* ICICI Securities, Kotak Securities, Bajaj Finance, Tata Housing Development, Tata Motors Finance, Birla Group Holdings, SBI Capital Securities, HDB Financial Services and National Bank for Agriculture and Rural Development raised funds via CP.

--Secondary market

* Punjab National Bank's CD maturing on Thursday was traded twice at a weighted average yield of 7.0801%.

* Small Industries Development Bank of India's CP maturing Tuesday was traded twice at a weighted average yield of 7.0001%.

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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