Informist, Friday, Dec 16, 2022
By Vishal Sangani
MUMBAI – Fundraising through certificates of deposit surged today as a few state-owned banks tapped the market to meet their funding needs, dealers said.
So far today, CDs worth 59.10 bln rupees have been issued, as against 24.00 bln rupees on Thursday. UCO Bank was the biggest issuer. The bank raised 23.50 bln rupees through papers maturing on Mar 15 at 7.10%.
Banks continue to rely on the short-term debt market to meet demand for credit, with the pace of growth in deposits lagging.
Supply of CDs is expected to rise in the coming days, as banks will tap the market due to fall in surplus liquidity.
Issuances of CDs will also surge at the end of the quarter, as banks borrow funds to meet their requirements and to disburse short-term loans to shore up their balance sheets.
According to latest data from the Reserve Bank of India, bank loans grew 17.45% on year to 131.07 trln rupees in the fortnight ended Dec 2. Deposits continued to lag credit growth, growing 9.85% on year to 175.24 trln rupees.
Liquidity in the banking system is currently estimated to be in a surplus of 975.59 bln rupees, down from 1.13 trln rupees on Thursday. The surplus is expected to narrow further in the coming days due to outflows of 1.00–1.50 trln rupees as advance tax payment for Oct-Dec, which started on Thursday. Major outflows are expected today, dealers said.
Corporate entities and individuals pay 15% of their estimated tax liability for a financial year in Apr-Jun, 30% each in the next two quarters, and the rest by Mar 15.
Rates on short-term debt papers were in a narrow range due to steady demand from mutual funds, dealers said.
Rates on three-month commercial papers issued by non-banking finance companies were quoted at 7.20-7.40%, while rates on papers of manufacturing companies were quoted at 6.95-7.15%.
Rates on three-month CDs were quoted at 6.85-7.10%.
Mutual funds have seen continuous inflow into liquid funds, which are deployed in short-term debt papers. They are also reinvesting the funds received from maturity of short-term papers.
L&T Finance Ltd was the lone issuer of CPs, raising 2.50 bln rupees through papers maturing in one-year at 7.90%.
On Thursday, Birla Group Holdings Ltd was the only issuer, raising 250 mln rupees through CPs.
–Primary market
* Canara Bank, Union Bank of India, UCO Bank, Axis Bank and Bank of Baroda raised funds through CDs.
–Secondary market
* National Bank for Agriculture and Rural Development’s CD maturing on Feb 14 was dealt five times at a weighted average yield of 6.8501%
* Infina Finance’s CP maturing on Feb 3 was dealt at a weighted average yield of 7.4001%
At 1640 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:
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 Ashish Shirke
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