Mumbai: The Reserve Bank of India's (RBI) liquidity measures have prompted some private banks to issue new certificates of deposit and raise cash. IndusInd bank raised Rs 5,100 crore in just two days, and RBL tapped the market after an interval raising about Rs 825 crore on Tuesday. State-owned banks with robust cash positions are the lenders, dealers said.
Daily volumes were in the range of Rs 5,000 crore-Rs 7,000 crore after the central bank policy on Friday, dealers said.
Trade had dried up before the central bank’s bout of cash injection into the system.
The money markets were shut on Wednesday, the first day of the financial year.
“The scene has changed after the RBI liquidity push lifting investor confidence,” said Ritesh Bhusari, deputy general manager at South Indian Bank.
“CD primary issuances almost paused before RBI’s latest policy as risk-averse investors were not ready to subscribe to papers of banks requiring shortterm money.” CDs are shortterm money market instruments, generally issued by banks raising money with less than one-year maturity.
IndusInd Bank obtained rates in the range of 7.75-8% across fourfive-six month maturities.
RBL offered 5.99-7.49% with maturities running up to three months. “Buyers beget buyers,” said Gopal Tripathi, head treasury at Jana Small Finance Bank.
“Now that CD issuances have resumed, banks scouting for short-term money will benefit while lenders sloshing about with funds would also obtain reasonable rates, with no significant market distortions.” Yes Bank on Tuesday mopped up Rs 3,500 crore, offering 8.25%.
The rates appear high, but not when its recent regulator-led bailout is considered. CD rates have fallen up to 275 bps since Friday after the RBI announced liquidity injection of Rs 3.74 lakh crore into the system in an unscheduled bi-monthly policy announcement. After advancing the MPC last week, the RBI further eased liquidity measures to ensure Rs 3.74 lakh crore entered the system.