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Short-Term Debt: Deficit liquidity, rise in supply drive up rates

Informist, Wednesday, Nov 29, 2023

By Asmita Patil


MUMBAI – Constrained liquidity in the banking system coupled with a rise in the supply of short-term instruments pushed up the rates of short-term papers by 5 basis points today, dealers said. 


Rates on three-month commercial papers issued by non-banking finance companies rose to 7.85-8.05% from 7.80-8.00% on Tuesday. Rates on papers of similar maturity issued by manufacturing companies rose to 7.40-7.60% from 7.35-7.55% on Tuesday.


Rates on three-month certificates of deposit rose to 7.30-7.50% from 7.25-7.45% on Tuesday. Axis Bank became the sole issuer of CDs today, raising around 40 bln rupees through papers maturing in 1-year at 7.87%. 


“Liquidity has been a concern for some time…today after Axis did 1-year maturity CD at 7.87%, the market got triggered and some other issuances are also lined up, which could have pushed rates to go higher,” a dealer with a mid-sized brokerage firm said. 


Liquidity in the banking system has been in deficit for most of 2023-24 (Apr-Mar). At the end of trade on Tuesday, liquidity in the banking system was in a deficit of 1.10 trln rupees, little changed from Monday, according to the RBI data.


Issuances of short-term instruments are also on the rise due to deficit liquidity in the banking system, dealers said. So far this month, companies and financial institutions have raised 885.35 bln rupees through CPs, as compared to 745.78 bln rupees in October, according to data sourced from the Clearing Corp of India and compiled by Informist.


Banks have raised 656.28 bln rupees through CDs, as against 577.21 bln rupees last month. 


“For NBFCs, levels are not established yet and for CDs, levels may go up by 4-5 bps because there are some more issuances in the pipeline,” a dealer with another brokerage firm said. 


Fundraising through CPs rose today due to a big size issuance by Reliance Retail Ventures, dealers said. So far today, companies and financial institutions have raised 26 bln rupees through CPs compared to 13.85 bln rupees on Tuesday.


Reliance Retail Ventures raised 21 bln rupees through CPs maturing in three months at 7.41%.  

–Primary market

* Reliance Retail Ventures and Kotak Securities raised funds through CPs.

* Axis Bank raised funds through CDs.


–Secondary market
* Bank of Maharashtra’s CD maturing on Thursday was dealt five times at a weighted average yield of 6.8268%.

* Tata Motors’s CP maturing on Thursday was dealt at a weighted average yield of 7.8268%.


At 1630 IST, the 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










Edited by Vidhi Verma


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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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