Short-Term Debt: Lack of big issuances drags CP fundraising down

Informist, Tuesday, Aug 29, 2023

By Asmita Patil

MUMBAI – Fundraising through commercial papers slumped today due to lack of big-ticket issuances by companies and financial institutions, dealers said. So far in the day, financial institutions have raised 9.75 bln rupees through CPs, as compared to 46.50 bln rupees on Monday.

On Monday, National Bank for Agriculture and Rural Development had raised 34 bln rupees through papers maturing in three months at 7.05%.

Rates on short-term papers remained flat, dealers said. Rates on three-month CPs issued by non-banking financial companies were quoted at 7.20-7.40%, and rates on papers of manufacturing companies were 7.10-7.30%.

Rates on three-month certificates of deposit were quoted at 7.00-7.20%. Punjab National Bank and IDFC First Bank raised funds through CDs.

Fundraising through CDs gained traction this month due to liquidity crunch in the banking system. Last week, liquidity in the banking system slipped into deficit for the first time in the current financial year that started in April due to incremental cash reserve ratio and monthly outflows on account of goods and services tax.

At the start of trade today, liquidity in the system was estimated to be in surplus of 260.16 bln rupees, higher than 114.97 bln rupees on Monday. Liquidity conditions have improved slightly on account of inflows in the form of salary and pension payment, which is the month-end spending by the government.

–Primary market

* Aditya Birla Finance, Sundaram Home Finance, L&T Finance, and Blue Star raised funds through CPs. 

* Punjab National Bank and IDFC First Bank raised funds through CDs. 

–Secondary market

* Indian Bank’s CD maturing on Sep 6 was dealt four times at a weighted average yield of 7.0600%.

* HDFC Bank’s CP maturing on Wednesday was dealt six times at a weighted average yield of 6.7903%.

At 1645 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

43.95

48.3539.2875.90

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

End

Edited by Ashish Shirke

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