Informist, Thursday, Mar 23, 2023
By Vishal Sangani
MUMBAI – Fundraising through certificates of deposit rose today as a state-owned bank and a financial institution tapped the primary market to meet their credit disbursement as liquidity is in deficit, dealers said.
CDs worth 35 bln rupees were issued, against 30 bln rupees on Tuesday. Punjab National Bank was the major issuer, raising 25 bln rupees through papers maturing in three months at 7.40%.
Market participants expect the supply of CDs to rise in the coming days as banks will tap the market to meet credit disbursement needs in view of the liquidity deficit.
Usually, fundraising by banks rises towards the end of every quarter to meet quarter-end requirements and to boost their balance sheets.
Banks continue to depend on the short-term debt market to meet demand for credit as growth in bank loans remains robust. According to the latest RBI data, advances by banks rose 15.5% on year to 134.51 trln rupees in the fortnight ended Feb 24. Deposits continued to lag credit growth, growing 10.14% on year to 178.62 trln rupees.
Liquidity in the banking system is currently estimated to be in a deficit of 765.14 bln rupees, down from 790.78 bln rupees on Tuesday.
Outflows on account of payments for state bonds auctioned on Tuesday weighed on the liquidity. States raised 358.21 bln rupees through the sale of securities at the auction.
Redemption of three-year targeted long-term repo operations of 119.87 bln rupees on Friday is also seen weighing on liquidity.
Meanwhile, issuances by the National Bank for Agriculture and Rural Development led to a spike in funds raised through commercial papers today.
The financial institution tapped the market to meet its funding requirements, dealers said.
So far today, CPs aggregating 30.75 bln rupees were issued, against 21.50 bln rupees on Tuesday. NABARD raised 30 bln rupees through papers maturing in three months at 7.32%.
Rates on short-term debt papers were in a narrow range due to steady demand from mutual funds, dealers said.
Demand from mutual funds is steady as they are reinvesting the funds received from the maturity of short-term papers, and lower issuances of such papers are forcing them to invest at lower rates.
Rates on three-month CPs issued by non-banking finance companies were quoted at 7.60-7.85%, while rates on papers of manufacturing companies were quoted at 7.40-7.60%.
Rates on three-month CDs were quoted at 7.30-7.50%.
–Primary market
* National Bank for Agriculture and Rural Development and Godrej Industries raised funds through CPs.
–Secondary market
* Bank of Baroda’s CD maturing on May 5 was dealt two times at a weighted average yield of 7.3097%
* Reliance Jio Infocomm’s CP maturing on Friday was dealt five times at a weighted average yield of 6.6123%
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 Vidhi Verma
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