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Tuesday, December 5, 2023

Short-Term Debt:CP rates up as RBI OMO sales may keep liquidity tight

Informist, Monday, Oct 9, 2023


By Asmita Patil and Sony

MUMBAI – Rates on commercial papers surged today followed by the Reserve Bank of India’s announcement to conduct open market operation sales to control liquidity in the banking system, dealers said. 


Rates on three-month commercial papers issued by non-banking financial companies rose to 7.55-7.75% from 7.45-7.65% on Friday. Rates on papers of similar maturity issued by manufacturing companies rose to 7.20-7.40% from 7.15-7.20% on Friday.


The RBI may consider open market operation sales to manage banking system liquidity going forward, Governor Shaktikanta Das said while detailing the outcome of the Monetary Policy Committee’s meeting on Friday. The timing and quantum of the OMOs will depend on the evolving liquidity conditions, Das said.


Open market operation sales entail the RBI selling gilts from its own stock of held securities, which adds to the domestic supply of bonds that banks have to absorb, pulling out excess cash.


Money market participants expect liquidity in the banking system to remain under pressure in the coming days with a pick-up in currency leakage from the festival season, which could keep the rates on short-term papers high, dealers said. 


“Rates are expected to shoot up as surplus liquidity won’t come back into the system till November end unless RBI takes some action,” an official with a large public sector non-banking financial company said.


At the start of trade today, liquidity in the banking system was estimated to be in a surplus of 27.60 bln rupees, as against a deficit of 340.61 bln rupees on Friday. According to dealers, the liquidity eased on account of the reversal of incremental cash reserve ratio, which was completed on Saturday.


During the day, inflows in the form of redemption of state government loans are scheduled, dealers said. Meanwhile, payment of government bond securities, which were auctioned on Friday, worth 300 bln rupees, are also lined up.


Fundraising through commercial papers rose today on account of big ticket issuance by National Bank for Agriculture and Rural Development. 


So far today, companies and financial institutions have raised 42.5 bln rupees through CPs. Of the total funds raised today, National Bank for Agriculture and Rural Development raised 36 bln rupees through papers maturing in three months, at 7.18% rate.


Lack of issuances of certificates of deposits kept the rates on CDs flat today. Rates on three-month certificates of deposit were quoted at 7.10-7.30%. 


On Friday, Punjab National Bank raised 30 bln rupess through CDs maturing on Dec 20, at a rate of 7.05%, whereas, no CPs were issued. 


–Primary market

* NABARD, Godrej Industries and Bajaj Finance raised funds through CPs


–Secondary market
* Canara Bank’s CD maturing on Oct 25 was dealt twice at a weighted average yield of 6.9998%.
* Reliance Industries Ltd’s CP maturing on Nov 9 was dealt five times at a weighted average yield of 7.0595%.


At 1700 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








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




Edited by Deepshikha Bhardwaj


For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.


Cogencis news is now Informist news. 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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