Informist, Thursday, May 25, 2023
By Vishal Sangani
MUMBAI – Rates on short-term debt papers such as certificates of deposit and commercial papers increased by 10-15 basis points today after a fall on Monday, as liquidity in the banking system hasn’t increased as it was expected to after the Reserve Bank of India announced the withdrawal of 2,000-rupee banknotes.
Rates on three-month CPs issued by non-banking finance companies were at 7.20-7.35%, up from 7.05-7.20% on Wednesday, while rates on papers of manufacturing companies rose by 10 bps to 7.00-7.20%.
Rates on three-month CDs were up at 6.90-7.10% from 6.80-7.00% on Wednesday.
There was immediate reaction to the news of the withdrawal of 2,000-rupee banknotes on Monday, when rates had fallen. After the news, the market had anticipated a rise in bank liquidity, but this has not been seen yet, a dealer from a brokerage house said.
Liquidity in the banking system is currently estimated to be in a surplus of 496.35 bln rupees, up from 442.55 bln rupees on Wednesday. The surplus widened marginally due to some inflows on account of the government’s spending, dealers said.
Since last week, rates on short-term debt papers are down 35-40 bps in the primary market after the Reserve Bank of India injected liquidity in the banking system through a 14-day variable rate repo auction and withdrawal of 2,000-rupee denomination banknotes.
Overall, rates are likely to remain at these level, a dealer from a state-owned bank said.
Large issuances by Reliance Retail Ventures led to a spike in funds raised through CPs today. A few companies also tapped the market to meet their funding requirements and to roll over papers set to mature in the coming days.
So far today, CPs aggregating 19.75 bln rupees were issued, against 10.50 bln rupees on Wednesday. Reliance Retail Ventures raised 10 bln rupees through papers maturing in three months at 7.02%.
Banks did not issue any CDs today as there is no immediate need for funds and also due to surplus liquidity in the banking system.
On Wednesday, Bank of Maharashtra was the only issuer of CDs, raising 25 bln rupees.
–Primary market
* Hero Fincorp, Tata Capital Financial Services, and Reliance Retail Ventures rasied funds through CPs.
–Secondary market
* Canara Bank’s CD maturing on Friday was dealt four times at a weighted average yield of 6.3594%
* Reliance Retail Ventures’ CP maturing on Friday was dealt five times at a weighted average yield of 6.3886%
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 Avishek Dutta
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