Short-Term Debt: NBFC CPs rates up on weak demand from mutual funds

Tuesday, Sep 29, 2020


By Vishal Sangani


MUMBAI – Rates on commercial papers of non-bank finance companies rose today due to weak demand from mutual funds, dealers said.


Market participants said fund houses are holding back their investments in short-term debt instruments because they want to keep liquidity in hand to invest in ultra short-term CPs of non-banking finance companies.


These CPs were ultra-short term ones issued by non-banking lenders to raise funds for clients subscribing to large initial public offering of equity shares.


IPOs of UTI Asset Management Co Ltd and Mazagon Dock Shipbuilders Ltd opened for public subscription today and will close on Thursday.


Usually, fund houses invest in such papers of companies as these investment options offer better yields in a short span of time.


Rates on three-month CPs of non-bank finance companies were up at 3.80-3.90% against 3.70-3.85% on Monday, and those on papers of manufacturing companies were steady at 3.45-3.65%.


Dealers also said that fund houses are holding back their investment as they are facing redemption pressure, which is a cyclical phenomenon during the end of a quarter.


On the issuances side, fundraising through CPs declined today because some companies have already rolled over the papers that were set to mature in the next few days and requirement for funds is low.


So far today, CPs aggregating 52.50 bln rupees were issued, against 93.35 bln rupees on Monday.


Further, banks did not issue any certificates of deposit today as there is no immediate need for funds.


Usually, the end of the quarter issuances of CDs surge as banks borrow funds to meet their funding requirements and to disburse short-term loans to shore up their balance sheet.


However, surplus liquidity in the banking system and muted credit growth kept most banks on the sideline.


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


Liquidity in the banking system is estimated to be in a surplus of over 2.72 trln rupees.


Liquidity surplus is expected to widen further in the comings days due to inflow of funds on account of month-end spending by the government on salaries and pensions.


–Primary market

* Indian Oil Corp, Aditya Birla Housing Finance, Tata Capital Financial Services, Bharat Petroleum Corp, Mangalore Refinery and Petrochemicals, Chennai Petroleum Corp, National Fertilizers and ICICI Securities raised funds through CPs.


–Secondary market

* Axis Bank's CD maturing on Dec 29 was dealt at a weighted average yield of 3.3598%

* Bajaj Finance's CP maturing on Wednesday was dealt 10 times at a weighted average yield of 3.7119%


Following are the volumes at 1400 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 Nidhi Chugh


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