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Short-Term Debt: Large issuances by NABARD boost CP volumes

Informist, Thursday, Jan 20, 2022


By Vishal Sangani


MUMBAI – Large issuances by National Bank for Agriculture and Rural Development led to a spike in funds raised through commercial papers today.


Also, a few companies rolled over papers set to mature in the coming days, while others tapped the market to meet fresh requirements for funds.


So far today, CPs aggregating 34.50 bln rupees were issued, as against 6.50 bln rupees sold on Tuesday. NABARD raised 30.0 bln rupees through papers maturing in three-month at 3.85%.


However, participation was low today as companies remained on the sidelines because of elevated rates.


Rates on short-term debt papers such as certificate of deposits and commercial papers had surged on Wednesday tracking overnight money market where lending rates have risen because of firm demand for funds from banks due to decline in the amount of overnight fixed rate reverse repo and also as banks have parked excess fund in seven-day variable rate reverse repo auction, dealers said.


On Wednesday, the amount parked at RBI’s daily fixed rate reverse repo subscription fell to 409.25 bln rupees, the lowest in nearly two years.


On Tuesday, the RBI had conducted a seven-day variable rate reverse repo auction, which saw banks park the entire notified amount of 2.0 trln rupees as against the maturity amount of 1.75 trln rupees.


Due to lower issuances rates remained in a narrow range. Rates on three-month CPs of manufacturing companies were quoted at 3.80-4.05%, while those on papers of non-bank finance companies were quoted at 4.20-4.35%.


Rates on three-month CDs were quoted at 3.70-3.90%.


Liquidity in the banking system is estimated to be in a surplus of over 6.06 trln rupees as against 6.34 trln rupees on Wednesday. Liquidity narrowed because of outflows on account of payments towards bonds auctioned by states.


Surplus liquidity in the banking system is expected to narrow more in the coming days due to outflow on account of goods and services tax payments.


With borrowing rates in money markets surging to the highest levels in over a year due to a sudden shortage of overnight funds, the Reserve Bank of India announced that it will conduct an overnight variable rate repo auction for notified amount of 500 bln rupees.


Banks borrowed 500.03 bln rupees at the overnight variable rate repo auction today.


“With larger than anticipated collections under the goods and services tax, system liquidity has tightened in this week,” the RBI said.


This will be the first variable rate repo auction since March 2021. Liquidity was in high surplus due to money infused in the banking system to tackle economic fallout of the COVID-19 pandemic. The RBI has conducted variable rate repo auctions only for four times since March 2020.


On the other hand, banks did not issue any certificate of deposit today as there is no immediate need for funds.


–Primary market

* Pilani Investment and Industries Corp, Bharat Oman Refineries and National Bank for Agriculture and Rural Development raised funds through CPs.


–Secondary market

* National Bank for Agriculture and Rural Development’s CD maturing on Feb 18 was dealt three times at a weighted average yield of 3.6999%

* Export Import Bank of India’s CP maturing on Mar 17 was dealt at a weighted average yield of 3.7299%


Following are the volumes at 1530 IST in the secondary market for short-term debt, in bln rupees, as detailed by the Clearing Corp of India’s F-TRAC platform:


Certificates of deposit

Commercial papers






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




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


Edited by Maheswaran Parameswaran


Cogencis news is now Informist. 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.


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Source: Cogencis

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