Banks, NBFCs hit bond mart with vengeance on RBI’s soft rate signal

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The debt market is abuzz with activity after the money policy review.

Banks and other companies have hit the bond market with a vengeance following a dovish signal on interest rates from the Reserve Bank of India (RBI).

HDFC was in the market on Thursday, raising Rs 1,000 crore for its operations through a commercial paper for four months at 8.90 per cent. Union Bank of India raised Rs 1000 crore through a one-year certificate of deposit (CD) at 8.90 per cent.

Uco Bank, Central Bank of India and Oriental Bank of Commerce raised between Rs 200 crore and Rs 500 crore for two to three months through certificates of deposit at rates ranging from 8.45 per cent to 8.50 per cent to meet quarter-end demand.

Public sector infrastructure finance company Rural Electrification Corporation (REC) is expected to hit the market in the next 10 days with a Rs 5,000 crore one-year issue, the biggest issuance till date this financial year. PFC is expected to follow suit.

Reliance Capital and Aditya Birla Money have raised between Rs 700 crore and Rs 800 crore, while Tata Capital and a few others have raised short-term money ranging from Rs 100 crore to Rs 200 crore for two to three months at 8.65 to 8.75 per cent, money market participants said. A senior public sector banker in charge of treasury said there was a clear cost advantage in CDs.

“One-year bulk deposits of Rs 10 to 15 crore are attracting interest rates of 9.10 per cent to 9.15 per cent, which make CD a cheaper alternative,” he said. Ajay Maglunia, senior VP for credit and fixed income at Edelweiss Financial Services, said the credit policy provided some clarity on interest rates. “MFs have funds to deploy. NBFCs were staying away from the debt market due to the DRR, which was part of the New Companies Act 2013,” Maglunia said.

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