Spread between 3-month NBFC CPs, T-bill highest in 9 months in November
Informist, Monday, Dec 11, 2023
By Asmita Patil
MUMBAI – The spread between three-month commercial papers issued by non-banking finance companies and three-month Treasury bills rose to 89 basis points in November, the highest in nine months, amid tight liquidity in the banking system and a rise in credit demand in the festival season.
Rates on three-month CPs issued by non-bank lenders jumped 15 bps to 7.85-8.05% in November, when rates on three-month Treasury bills rose marginally to 6.96%. Rates on CPs of the same maturity issued by manufacturing companies rose 5 bps to 7.40-7.60%.
TREND
Rates on CPs increased as systemic liquidity remained in deficit for most of November. At the end of the month, liquidity in the banking system was in a deficit of 487.55 bln rupees, according to data from the Reserve Bank of India.
Stifled by tight liquidity in the banking system, corporations and non-bank lenders rushed to the short-term debt market to meet their working capital needs, despite high rates.
Fundraising through CPs rose 34.4% on month to 1.01 trln rupees in November, according to data compiled by Informist. Non-banking finance companies accounted for 550.55 bln rupees of the funds raised. Manufacturing companies raised 390.36 bln rupees. The rest of the fundraising came from housing finance companies. In November 2022, companies and financial institutions raised 1.22 trln rupees through CPs.
"Now till March, it is going to be a busy season due to festivals... so the issuances are going to be up even at higher rates,” said a director of fixed income at a brokerage firm.
Reliance Retail Ventures became the largest issuer of CPs in November, raising 110.75 bln rupees, followed by ICICI Securities with issuances worth 45.45 bln rupees. Other top issuers were National Bank for Agriculture and Rural Development, Aditya Birla Finance, and Sikka Ports and Terminals.
CPs worth 1.18 trln rupees came up for redemption in November, against 723.34 bln rupees in October. Of the CPs due for redemption, papers worth 715 bln rupees were rolled over and papers worth 468 bln rupees were redeemed.
CERTIFICATE OF DEPOSITS
Fundraising through certificates of deposit in November also rose to the highest level in 2023-24 (Apr-Mar) on strong demand for funds from public-sector banks amid a marginal rise in rates. Rates on CDs rose 5 bps to 7.30-7.50% in November.
Total funds raised through CDs rose 18.7% on month and 5.7% on year to 758.84 bln rupees. Fundraising through CDs by state-owned banks rose 24% on month to 444.24 bln rupees, and that by private banks rose 10% to 308.10 bln rupees.
Among state-owned banks, Punjab National Bank was the top issuer of CDs in November, raising 141.75 bln rupees, followed by Union Bank of India with issuances worth 99.50 bln rupees.
Among private banks, HDFC Bank was the largest issuer in November, raising 107.50 bln rupees. NABARD raised 6.5 bln rupees through CDs in November.
Details of CPs and CDs issued in November as per data sourced from the Clearing Corp of India and compiled by Informist (amount in bln rupees):
