Short-Term Debt: Large deal by SIDBI boosts CD mop-up; CD rates up

Informist, Monday, Jan 9, 2023

By Vishal Sangani

MUMBAI – Funds raised through certificates of deposit rose today because of a large issuance by Small Industries Development Bank of India.

The financial institution tapped the market to meet its funding requirements and roll over papers set to mature in the coming days.

Canara Bank also tapped the market for its funding needs and also due to strong growth in credit, dealers said.

So far today, CDs aggregating 42.50 bln rupees were issued, as against 10.00 bln rupees on Friday. SIDBI raised 40 bln rupees through papers maturing in one year at 7.70%.

Most banks remained on the sidelines as there is no immediate need for funds.

Rates on three-month CDs increased today due to surge in issuances and also because the liquidity surplus in the banking system narrowed. Rates on three-month CDs were at 6.95-7.20%, up from 6.90-7.15% on Friday.

Liquidity in the banking system is currently estimated to be in a surplus of 843.22 bln rupees, down from 1.55 trln rupees Friday. The surplus has narrowed due to outflows on account of excise duty payments.

Outflows on account of payments for government bonds auctioned on Friday also weighed on the liquidity. The government raised 280 bln rupees through the sale of securities at the auction.

On the other hand, funds raised through commercial papers were low today in the absence of big-ticket issuances, dealers said.

So far today, CPs aggregating 14.00 bln rupees have been issued, against 19.25 bln rupees on Friday. Bharat Heavy Electricals was the major issuer, raising 5.0 bln rupees through papers maturing on Mar 23 at 6.70%.

On Friday, National Bank for Agriculture and Rural Development was the only issuer, had raised 19.25 bln rupees through CPs.

Supply of CPs also fell as some non-banking finance companies stayed on the sidelines due to low requirement for funds, dealers said.

Rates on CPs were unchanged today because of lower market participants.

Rates on three-month CPs issued by non-banking finance companies were quoted at 7.25-7.55%, while rates on papers of manufacturing companies were quoted at 7.05-7.25%.

–Primary market

* Chennai Petroleum Corp, Tata Motors Finance, Bharat Heavy Electricals and National Bank for Agriculture and Rural Development raised funds through CPs.

* Small Industries Development Bank of India and Canara Bank raised funds through CDs.

–Secondary market

* Bank of Baroda’s CD maturing on Apr 10 was dealt at a weighted average yield of 6.9399%

* Small Industries Development Bank of India’s CP maturing on Mar 10 was dealt two times at a weighted average yield of 6.4901%

At 1625 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

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11.107.254.606.25

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 Aditya Sakorkar

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