Informist, Thursday, Jun 1, 2023
By Vishal Sangani
MUMBAI – Rates on commercial papers declined today as surplus liquidity widened further in the banking system and demand from mutual funds remained steady, dealers said.
Liquidity in the banking system is currently estimated to be in a surplus of 1.76 trln rupees, up from 1.35 trln rupees on Wednesday. The surplus widened further due to month-end spending by the government in the form of salaries and pension payouts.
A few dealers said surplus liquidity may also increase due to deposits received from 2,000-rupee banknotes.
On May 19, the central bank announced the withdrawal of 2,000-rupee denomination banknotes from circulation by Sep 30. However, it clarified that these banknotes would continue to be legal tender. The public can deposit 2,000-rupee banknotes into their bank accounts or exchange them with banknotes of other denominations at any bank branch, the RBI said.
Rates on three-month commercial papers issued by non-banking finance companies was down at 7.10-7.25% from 7.15-7.30% on Wednesday, while rates on commercial papers of manufacturing companies fell by five basis points to 7.00-7.20%.
There is a steady inflow in liquid funds of mutual funds, which is being deployed in such papers. Mutual funds are also reinvesting the funds received from maturity of short-term papers.
Funds raised through CPs fell today in the absence of big-ticket issuances, dealers said.
So far today, commercial papers aggregating 28.50 bln rupees were issued against 74.00 bln rupees on Wednesday. Bajaj Finance was the biggest issuer, raising 20.50 bln rupees through papers maturing in three months at 7.10%.
On Wednesday, Reliance Retail Ventures Ltd was the major issuer that raised 50 bln rupees through commercial papers.
While, non-banking finance companies were the major issuers today, they raised funds to meet their credit disbursement requirement.
On the other hand, Small Industries Development Bank of India was the lone issuer of certificates of deposit today, raising 50 bln rupees at 7.40% through papers maturing in one year. The financial institution tapped the market to meet fresh capital requirements for funds and to roll over papers set to mature in the coming days, dealers said.
On Wednesday, Indian Bank had raised 40 bln rupees through certificates of deposit.
Meanwhile, most banks remained on the sidelines as there is no immediate need for funds and liquidity in the banking system is in surplus.
Rates on three-month certificates of deposit were unchanged at 6.95-7.15%.
–Primary market
* Poonawalla Fincorp, Aditya Birla Finance, Axis Finance, and Bajaj Finance raised funds through commercial papers.
–Secondary market
* Canara Bank’s certificates of deposit maturing on Aug 22 was dealt five times at a weighted average yield of 6.9001%
* Reliance Retail Ventures’ CP maturing on Jun 3 was dealt five times at a weighted average yield of 6.3156%
At 1630 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 Deepshikha Bhardwaj
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