Informist, Tuesday, Jun 6, 2023
By Vishal Sangani and Asmita Patil
MUMBAI – Funds raised through commercial papers rose marginally in May as a jump in issuances by non-banking finance companies offset a fall in issuances by housing finance and manufacturing companies.
Companies raised 1.17 trln rupees through commercial papers in May, compared with 1.11 trln rupees raised in April and 1.23 trln rupees a year ago.
The increase was primarily on account of a 47.2% on-month jump in funds raised by non-banking finance companies to 586.23 bln rupees. The non-banking finance companies took advantage of the fall in market rates in May to meet their credit disbursement requirements.
The cost of raising short-term funds declined in the primary market in May after the Reserve Bank of India injected liquidity into the banking system through a 14-day variable rate repo auction and the withdrawal of 2,000-rupee denomination banknotes from circulation.
Rates on three-month commercial papers issued by non-banking finance companies fell by 15-25 basis points during the month to 7.15-7.30%, while those on CPs issued by manufacturing companies declined by 15 bps to 7.05-7.25%.
The spread between State Bank of India's one-year marginal cost of funds-based lending rate and three-month CP rates of non-banking finance companies widened to 135 bps in May from 120 bps in April. CP rates fell 15 bps in May, while SBI's one-year MCLR-based rate remained unchanged at 8.50%.
Fundraising by manufacturing companies fell 16.8% on month to 488.02 bln rupees in May in the absence of big-ticket issuances. Fundraising by housing finance companies fell 21.3% on month to 98.30 bln rupees.
Small Industries Development Bank of India was the biggest issuer of commercial papers in May, raising 142.75 bln rupees, followed by Reliance Retail Ventures, which raised 119.00 bln rupees.
Other major issuers included Housing Development Finance Corp, National Bank for Agriculture and Rural Development, Reliance Industries, and Tata Steel.
Of the CPs worth 1.05 bln rupees scheduled for redemption in May, papers worth 261.53 bln rupees were not rolled over. Companies which did not roll over their CPs included Export Import Bank of India, Kotak Mahindra Investments, LIC Housing Finance, and Reliance Jio Infocomm.
CERTIFICATES OF DEPOSIT
Fundraising through certificates of deposit more than doubled on month in May as state-owned banks tapped the market to raise money for operational requirements, taking advantage of lower rates, dealers said.
Banks raised a total of 611.15 bln rupees through CDs in May, up 136.8% on month from 258.13 bln rupees. In May last year, banks had raised 461.85 bln rupees through CDs, as per data compiled by Informist.
State-owned banks were the major issuers in the short-term debt market in May, accounting for three quarters of the total issuances. Among state-owned banks, Punjab National Bank was the top issuer, raising 224.30 bln rupees, followed by Canara Bank with issuances worth 99.50 bln rupees.
Rates on three-month CDs declined 15 bps during the month to 6.95-7.15%.
Public-sector banks also borrowed funds through short-term debt as some faced a liquidity crunch.
Though overall liquidity in the banking system was around 1 trln rupees, the central bank announced a 14-day variable rate repo auction in mid-May as certain banks and institutions faced a liquidity crunch, RBI Governor Shaktikanta Das said at an industry function.
On May 31, liquidity in the banking system was estimated to be in a surplus of 1.76 trln rupees, up from 812.73 bln rupees on May 1.
Issuances of CDs by private lenders fell 4.2% on month to 128.75 bln rupees in May.
Among private banks, Axis Bank was the largest issuer, raising 41.50 bln rupees, followed by Kotak Mahindra Bank with issuances worth 28.50 bln rupees.
Details of CPs and CDs issued in May, amount in bln rupees:
| CPs | May | Apr | MoM change in % | May-22 | YoY change in % |
| Housing finance companies | 98.30 | 124.85 | (-)21.27 | 203.25 | (-)51.64 |
| Non-banking finance companies | 586.23 | 398.29 | 47.19 | 382.42 | 53.29 |
| Manufacturing companies | 488.02 | 586.44 | (-)16.78 | 538.08 | (-)9.30 |
| Total | 1,172.55 | 1,109.58 | 5.68 | 1,123.75 | 4.34 |
| CDs | May | Apr | MoM change in % | May-22 | YoY change in % |
| State-owned banks | 459.65 | 85.50 | 437.60 | 112.75 | 307.67 |
| Private banks | 128.75 | 134.38 | (-)4.19 | 327.10 | (-)60.64 |
| Other financial institutions | 22.75 | 38.25 | (-)40.52 | 22.00 | 3.41 |
| Total | 611.15 | 258.13 | 136.76 | 461.85 | 32.33 |
End
Edited by Rajeev Pai
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