Short-Term Debt: CPs rates flat as RBI keeps repo rate unch at 4.00%

Informist, Wednesday, Apr 7, 2021


By Vishal Sangani


MUMBAI – Rates on commercial papers were flat today after the Reserve Bank of India's Monetary Policy Committee unanimously voted to leave the repo rate unchanged at 4.00% and maintained its accommodative stance.


The committee's decision to leave the policy rate unchanged at a record low is along expected lines, with all 20 economists polled by Informist expecting a status quo on rates.


"The MPC decided to continue with the accommodative stance as long as necessary to sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward," the committee said in its resolution.


Rates on three-month CPs of non-bank finance companies were quoted at 3.65-3.75%, and those on the papers of manufacturing companies were quoted at 3.40-3.55%.


To take out excess liquidity from the system, the central bank decided to conduct variable rate reverse repo auctions of longer maturity. The amount and tenor of these auctions will be decided based on the evolving liquidity and financial conditions.


"This is a part of RBI's liquidity management operations and should not be read as liquidity tightening" said RBI Governor Shaktikanta Das. "In fact, by paying a higher rate of interest on liquidity absorptions through the VRRR (variable rate reverse repo) auctions, the RBI is indirectly expanding liquidity."


The amount raised through commercial papers rose today on account of large deals by National Bank for Agriculture and Rural Development and Hindustan Petroleum Corp.


These companies tapped the market to meet their funding requirements and rolled over papers set to mature in the coming days.


So far today, CPs aggregating 48 bln rupees were issued, as against 27.75 bln rupees sold on Tuesday. NABARD and Hindustan Petroleum Corp raised 24 bln rupees each through CPs.


No certificate of deposit was issued by banks today. The issuance of CDs has been particularly scarce as there is liquidity surplus in the banking system. With the growth in bank deposits consistently outpacing credit growth, banks have had little reason to tap the short-term debt market.


Liquidity in the banking system is estimated to be in a surplus of over 6.16 trln rupees as against 6.07 trln rupees on Tuesday.


Rates on three-month CDs were quoted at 3.35-3.50% in the secondary market.


–Primary market

* NABARD and Hindustan Petroleum Corp raised funds through CPs.


–Secondary market

* Bank of Baroda's CD maturing on Jun 1 was dealt at a weighted average yield of 3.2000%

* Export-Import Bank of India's CP maturing on Jun 29 was dealt two times at a weighted average yield of 3.2999%


Following are the volumes at 1530 IST in the secondary market for short-term debt, in bln rupees, 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




IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT


Edited by Ramya J.S. D'Rozario


Cogencis news is now Informist. 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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