Informist, Monday, May 22, 2023

By Vishal Sangani

MUMBAI – Rates on certificates of deposit and commercial papers fell further by 5-10 basis points today as market participants expect liquidity in the banking system to rise after the Reserve Bank of India announced the withdrawal of 2,000-rupee banknotes.

On Friday, the central bank announced the withdrawal of 2,000-rupee denomination banknotes from circulation by Sep 30. It said the total value of these notes in circulation was 3.62 trln rupees as of Mar 31.

The public can deposit 2,000-rupee banknotes into their bank accounts or exchange them into banknotes of other denominations at any bank branch. For the exchange of 2,000-rupee banknotes into other denomination banknotes, the limit is set at 20,000 rupees at a time at any bank starting from Tuesday.

Market participant expects bank deposits to increase by 1.5-2.5 trln rupees by Sep 30. The banking system's liquidity might gradually increase by 500 bln rupees to 1.50 trln rupees by the end of September.

Rates on three-month CPs issued by non-banking finance companies were down at 7.05-7.20% from 7.15-7.25% on Friday, while rates on papers of manufacturing companies fell by 10 bps to 6.90-7.10%.

Rates on three-month CDs declined to 6.80-7.00% from 6.85-7.05% on Friday.

Since last week, rates on short-term debt papers have declined by 35-40 bps after the Reserve Bank of India injected liquidity in the banking system through 14-day variable rate repo auction and also as surplus liquidity widened in the banking system.

Liquidity in the banking system is currently estimated to be in a surplus of 934.61 bln rupees, up from 875.81 bln rupees on Friday. The surplus liquidity has widened due to inflow 661.65 bln rupees on maturity of the 7.16%, 2023 bond.

Market participants see liquidity improving further on higher-than-expected dividend payout by the central bank to the government.

The RBI's central board of directors on Friday approved the transfer of 874.16 bln rupees as surplus to the central government for the financial year 2022-23 (Apr-Mar). The Budget for 2023–24 had pegged the government's income from dividends of the RBI and state-owned banks at 480 bln rupees. 

On the issuances side, funds raised through CPs were down today because companies remained on the sidelines as they weren't in immediate need of funds and also a few companies have already rolled over papers set to mature in the next few days, dealers said.

So far today, CPs aggregating 41.00 bln rupees were issued, against 47.00 bln rupees on Friday. Larsen & Toubro and Bajaj Finance was the biggest issuer, raising 15 bln rupees each through papers maturing in three months.

Some companies tapped the market to meet their funding requirements and also to take advantage of a fall in rates, dealers said.

On the other hand, Canara Bank was the lone issuer of certificates of deposit today, raising 6 bln rupees at 6.80% through papers maturing in three months. The state-owned bank tapped the market to meet fresh capital requirements for funds and to roll over papers set to mature in the coming days, dealers said.

On Friday, Bank of Baroda had raised 20 bln rupees through CDs.

--Primary market

* Can Fin Homes, Bajaj Finance, Larsen & Toubro, Tata Power Co, and Axis Securities raised funds through CPs.

--Secondary market

* Punjab National Bank's CD maturing on Aug 9 was dealt two times at a weighted average yield of 7.0702%

* Tata Power Co's CP maturing on May 29 was dealt at a weighted average yield of 6.3012%

At 1630 IST, 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:

NOTE: Details of the deals have been received from market sources.

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Maheswaran Parameswaran

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2023. All rights reserved.