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Short-Term Debt: Rates flat as MPC outcome in line with expectations

Informist, Friday, Dec 8, 2023


By Asmita Patil


MUMBAI – Rates on short-term debt instruments remained flat today after the Reserve Bank of India’s Monetary Policy Committee stood pat on the repo rate, as widely expected, dealers said. This is the fifth straight policy where the six-member committee has left the repo rate unchanged after raising the repo rate by 250 basis points between May 2022 and February.


The committee kept the repo rate unchanged at 6.50% and also retained its “withdrawal of accommodation” stance to ensure inflation progressively aligns with the central bank’s target of 4%, while supporting growth.


RBI Governor Shaktikanta Das did not present any surprises on the liquidity front, as opposed to the last two policy statements, dealers said. “Nothing was expected, and they gave out nothing,” a dealer with a mid-sized brokerage firm said. 


Liquidity in the banking system slipped into deficit in August after RBI announced an incremental cash reserve ratio of 10% on net demand and time liabilities of banks. The anticipation of open market operation sale of government securities through an auction, announced by the RBI in its October policy review, weighed on liquidity further. 


At the end of trade on Thursday, liquidity in the banking system was in a deficit of 162.54 bln rupees, as against 25.04 bln rupees on Wednesday, as per data from the RBI. 


Liquidity should remain tight in near future and the high rates on short-term paper will be the new normal, with additional rise in rates depending on demand-supply match or mismatch, a senior official at a mid-sized mutual fund house said.   


Rates on three-month commercial papers issued by non-banking finance companies were flat at 8.00-8.20%. Rates on papers of similar maturity issued by manufacturing companies were at 7.45-7.65%.


Fundraising through CPs rose today due to big ticket issuance by the Export-Import Bank of India, dealers said. The lender raised 20 bln rupees through papers maturing in June at 7.60%. 


So far today, companies and financial institutions have raised 38.5 bln rupees through CPs in total, against 17 bln rupees on Thursday.  


Rates on three-month certificates of deposits were quoted at 7.30-7.50%. Banks continued their fundraising spree through CDs, raising 35.5 bln rupees, against 73.5 bln rupees on Thursday. 


–Primary market

* Bajaj Housing Finance, Tata Power Renewable Energy, HDFC Credila Financial Services, and Export-Import Bank of India raised funds through CPs.

* Canara Bank, HDFC Bank, and Indian Bank raised funds through CDs


–Secondary market
* Natinal Bnak for Agriculture and Rural Development’s CD maturing on Jan 23 was dealt thrice at a weighted average yield of 7.4899%.

* Bharati Enterprices’ CP maturing on Feb 27 was dealt twice at a weighted average yield of 8.0202%.


At 1700 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 Aditya Sakorkar


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Source: Cogencis

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