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Tuesday, October 4, 2022

Short-Term Debt: Rates surge as RBI hikes repo rate, CRR

Informist, Wednesday, May 4, 2022

 

By Vishal Sangani

 

MUMBAI – Rates on short-term debt papers such as commercial papers and certificates of deposit surged today after the Monetary Policy Committee raised the repo rate and Cash Reserve Ratio in an off-cycle meeting, dealers said.

 

In a surprise move, the Reserve Bank of India hiked the repo rate by 40 basis points to 4.40% and the Cash Reserve Ratio of banks by 50 bps to 4.5%.

 

Rates on three-month CPs of non-banking finance companies rose to 4.95-5.15% as against 4.30-4.55% on Monday, and those on papers of manufacturing companies rose to 4.70-4.90% against the previous close of 4.10-4.30%.

 

Rates on three-month CDs were at 4.50-4.70% compared with 4.00-4.20% on Monday.

 

In a video address, Reserve Bank of India Governor Shaktikanta Das said the Monetary Policy Committee will remain accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.

 

The hike in Cash Reserve Ratio will come into effect from the fortnight starting May 21. The measure is expected to withdraw 870 bln rupees of liquidity from the system, which is in line with the April policy commitment to withdraw excess liquidity provided to the system as part of measures to tackle COVID-19 over a multi-year timeframe.

 

However, the RBI said it will ensure adequate liquidity in the system to meet the productive requirements of the economy in support of credit offtake and growth.

 

Godrej Industries, which tapped the market after the RBI announcement, raised 750 bln rupees through papers maturing in three months at 4.75%. Before the RBI announcement, state-owned Hindustan Petroleum Corp raised 10 bln rupees by placing May 30 CPs at 3.95%.

 

So far today, CPs aggregating 15.75 bln rupees were issued, against 28.00 bln rupees on Monday.

 

Financial markets were shut Tuesday on account of Id-ul-Fitr.

 

Banks did not issue any CDs as there is no immediate need for funds owing to surplus liquidity in the banking system.

 

Liquidity in the banking system is currently estimated to be in a surplus of over 5.56 trln rupees as against 5.47 trln rupees on Monday. The liquidity surplus widened because of the government’s month-end spending in the form of salaries and pension payouts.

 

–Primary market

* Godrej Industries, NLC TamilNadu Power, and Hindustan Petroleum Corp raised funds through CPs.

 

–Secondary market

* Bank of Baroda’s CD maturing on May 10 was dealt four times at a weighted average yield of 3.8706%

* National Bank for Agriculture and Rural Development’s CP maturing on May 19 was dealt at a weighted average yield of 3.9508%

 

At 1530 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:

 

Certificates of deposit

Commercial papers

Today

Previous

Today

Previous

31.1016.008.9512.50

 

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 Ashish Shirke

 

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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© Informist Media Pvt. Ltd. 2022. All rights reserved.

Source: Cogencis

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