Informist, Monday, Feb 12, 2024

By Asmita Patil 

MUMBAI – Fundraising through commercial papers fell today amid high rates and widening liquidity deficit in the banking system, dealers said. So far today, CPs worth 10.5 bln rupees were issued compared with 29.75 bln rupees on Friday. 

"Rates are too high, so there is some caution from the issuer side," a dealer with a small brokerage firm said. 

Rates on short-term debt instruments rose 10 basis points after the Reserve Bank of India announced the monetary policy on Thursday. Rates on three-month CPs issued by non-banking finance companies were flat at 8.55-8.75% today. Rates on similar-maturity papers issued by manufacturing companies were at 7.95-8.15%. 

"Papers issued by manufacturing companies are getting good demand otherwise there is hardly any demand for NBFC CPs and CDs in the short-term," a dealer with a mid-sized brokerage firm said. Rates on three-month certificates of deposit were also flat at 7.85-8.05%. None of the banks issued CDs today. 

The RBI's frequent intervention through variable rate repo auctions has done little to improve market sentiment, dealers said. At the end of Friday, the liquidity deficit in the banking system was at 1.97 trln rupees, as against 1.96 trln rupees at the end of trade on Thursday, according to data from the RBI.

The RBI infused 500 bln rupees into the banking system through two four-day variable rate repo auctions today. "We don't know if the RBI will continue with VRR or not. If the liquidity gets slightly better they (the RBI) may also bring VRRR (variable rate reverse repo)... under such conditions, it's difficult to place bets on three-month paper," the dealer with the mid-sized brokerage firm said. 

--Primary market

* Kotak Mahindra Prime, Birla Group Holdings, Aditya Birla Housing Finance, and Axis Securities raised funds through CPs.

--Secondary market

* Indian Bank's CD maturing on Mar 5 was dealt thrice at a weighted average yield of 7.3992%

* HDFC Bank's CP maturing on Mar 22 was dealt twice at a weighted average yield of 7.9995%

At 1630 IST, the following were the volumes, in bln rupees, in the secondary market for short-term debt, as detailed by the Clearing Corp of India's F-TRAC platform:

End

Edited by Saji George Titus

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