Informist, Friday, May 19, 2023
By Vishal Sangani
MUMBAI – Rates on certificates of deposit and commercial papers fell further by 5-10 basis points today after the Reserve Bank of India injected liquidity in the banking system through 14-day variable rate repo auction, dealers said.
Banks borrowed 467.90 bln rupees from the 14-day variable rate repo auction for 500 bln rupees. The RBI announced the auction after the money market participants had asked Fixed Income Money Market and Derivatives Association of India to petition to infuse liquidity through variable rate repo operations as overnight cost of funding had become uncomfortably high.
The weighted average call rate – the operating target of monetary policy – has been consistently above the marginal standing facility rate of 6.75% last week.
Rates on short-term debt papers had declined by 25-30 basis points in last three days as surplus liquidity widened in the banking system and because of steady demand from mutual funds.
Rates on three-month CPs issued by non-banking finance companies fell to 7.15-7.25% from 7.20-7.30% on Thursday, while rates on papers of manufacturing companies fell by five bps to 7.00-7.15%.
Rates on three-month CDs declined to 6.85-7.05% from 6.95-7.15% on Thursday.
Liquidity in the banking system is currently estimated to be in a surplus of 875.81 bln rupees, up from 818.66 bln rupees on Thursday. The surplus liquidity has widened due to inflow of 388.87 bln rupees on account of maturity of the 4.26%, 2023 government bond on Wednesday.
Surplus liquidity will increase due to inflow of 661.65 bln rupees on maturity of the 7.16%, 2023 bond on Saturday.
However, outflows on account of payments for goods and services tax in the coming days are likely to weigh on liquidity.
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 today 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 pegged the government’s income from dividends from RBI and state-owned banks at 480 bln rupees. However, market expects the dividend payout to be 500 bln-1.5 trln rupees, dealers said.
The central bank transfers the cash surplus it generates from its own balance sheet to the government once a year, while maintaining a contingency risk buffer of 5.50%, as recommended by the Jalan committee.
The board decided to maintain the central bank’s contingency risk buffer at 6.00% of its balance sheet.
On the issuances side, funds raised through CPs fell today in the absence of big-ticket issuances, dealers said.
So far today, CPs aggregating 47.00 bln rupees were issued, against 104.25 bln rupees on Thursday. Small Industries Development Bank of India was the biggest issuer, raising 25 bln rupees through papers maturing in six months at 7.28%.
On Thursday, National Bank for Agriculture and Rural Development and Reliance Retail Ventures were major issuer and had raised 85 bln rupees in total through CPs.
Some companies tapped the market to meet their funding requirements and to roll over papers set to mature in the coming days.
The companies also raised funds to take advantage of a fall in rates, dealers said.
On other hand, Bank of Baroda was the lone issuer of CDs today, raising 20 bln rupees at 6.86% through papers maturing in three months. The state-owned bank tapped the market to meet fresh capital requirements and to roll over papers set to mature in the coming days, dealers said.
–Primary market
* HDB Financial Services, Toyota Financial Services, Sundaram Finance, Kotak Securities, HDFC Securities, Tata Power Renewable Energy, Small Industries Development Bank of India and Poonawalla Fincorp raised funds through CPs.
–Secondary market
* Canara Bank’s CD maturing on May 22 was dealt three times at a weighted average yield of 6.4030%
* SIDBI’s CP maturing on May 22 was dealt three times at a weighted average yield of 6.4518%
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 Akul Nishant Akhoury
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