“Banks are not raising deposit rates because they are able to get money easily from the money market by issuing CDAnd that too cheaply, and they can continue to choose this fundraising route for the next few weeks,” said Raju Sharma, head of fixed income
mutual fund.
Indian private and state run banks It has raised nearly 300 billion rupees ($3.76 billion) through two-month to one-year CDs from two weeks to August 19, up from nearly 50 billion rupees in the past two weeks, data compiled by Reuters showed. Is.
Large lenders, such as Aurora, have also jumped on the bandwagon and are actively borrowing money through three-month and one-year notes. These lenders are paying around 6.60%-6.74% for a one-year fund, and are keen to tie the fund for one year in anticipation of policy tightening in the near future.
reserve
The repo rate is 5.40%.
India’s banking system liquidity surplus has fallen below Rs 1 trillion, and averaged around Rs 1.40 trillion in August, falling further from Rs 1.90 trillion in July and Rs 2.92 trillion in June.
Venkatakrishnan Srinivasan, founder and managing partner, debt advisory firm Rockfort Fincap, said, “With the liquidity exhausted from the banking system, we expect banks to continue to raise funds through CDs and bonds.
Market participants also said a pick-up in credit growth as the economy revives will create the need for a steady flow of funds into banks. Also, mutual funds have been happy to park funds in CDs, thus making it beneficial for the issuers as well as the investors.
Sharma of IDBI Mutual Fund said, “Debt funds which are mandated to invest in a short duration are always on the lookout for investment opportunities, and this is the prime reason why banks are able to get large amounts without any huge margin. Huh.”
Chief Economist Upasana Bhardwaj said, “We expect an effective hike of 60-75 bps in the policy rate due to the liquidity crunch.”
Told.