Informist, Thursday, Dec 7, 2023

By Subhana Shaikh

MUMBAI – Fundraising through commercial papers and certificates of deposits fell marginally today as borrowers exercised some caution ahead of the outcome of the Reserve Bank of India's monetary policy, due on Friday, dealers said.

According to a poll by Informist, the RBI's Monetary Policy Committee is expected to keep the repo rate unchanged at 6.50% and policy at "withdrawal of accommodation".

The central bank's move on liquidity will be keenly watched out for, with market participants expecting it to keep liquidity condition tight, to enhance transmission of past rate hikes.

So far, liquidity conditions have remained tight, which has helped the RBI in avoiding the need for open market operation sales through the auction route in the near term. In its last policy in October, the RBI had spooked markets over the likelihood of OMO sales.

Tight liquidity conditions sent banks scrambling towards the short-term debt market to raise funds. So far today, issuances through CDs were at 45.25 bln rupees, compared to 50 bln rupees on Wednesday.

Punjab National Bank raised 18 bln rupees through CDs maturing in three months at 7.38%, while HDFC Bank and Canara Bank both borrowed 10 bln rupees through CDs maturing in three months each at 7.36%. Bank of Baroda also tapped the market and raised 7.25 bln rupees.

At the end of trade on Wednesday, liquidity in the banking system was in a deficit of 25.04 bln rupees, as against a surplus of 115.59 bln rupees on Tuesday, according to RBI data. The liquidity once again went into deficit due to outflows in the form of tax deducted at source and excise payments, dealers said.

Meanwhile, fundraising through commercial papers aggregated to 17 bln rupees so far today, against 25.25 bln rupees on Wednesday. Some companies tapped the market to meet their funding requirements and rolled over papers set to mature in the coming days, dealers said.

Overall, rates remained largely steady owing to decent demand from mutual funds, dealers said. Rates on three-month CPs issued by non-banking finance companies remained flat at 8.00-8.20%. Rates on papers of similar maturity issued by manufacturing companies were at 7.45-7.65%.

Rates on three-month CDs were quoted at 7.30-7.50%.

--Primary market

* Redington India and Larsen and Toubro raised funds through CPs.

* Bank of Baroda, HDFC Bank, Canara Bank and PNB raised funds through CDs

--Secondary market
* Union Bank of India's maturing on Jan 10 was dealt four times at a weighted average yield of 7.3500%.

* HDFC Securities' CP maturing on Friday was dealt thrice at a weighted average yield of 6.7903%.

At 1800 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 Manisha Baxla

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