Issuance of certificates of deposit (CDs) having a maturity of one year rose today with banks and mutual funds purchasing these papers on view that rates may ease in the near future, dealers said.
Banks raised Rs 500 crore through one-year CDs, compared with just Rs 285 crore on Tuesday. Finance Minister P Chidambaram had on Monday said RBI may cut interest rates if the inflation rate eases further.
Inflation rate for the week ended November 8 was 8.90 per cent, compared with 8.98 per cent a week ago.
The rates have remained unchanged so far this week amid low participation by mutual funds. Three-month CPs were quoted at 13-14 per cent, unchanged from Tuesday, while three-month CDs remained flat at 9.00-9.25 per cent.
Secondary market CDs maturing in December were dealt in the band of 7.50-8.00 per cent, compared with 8.00-8.50 per cent on Tuesday. March maturity papers were dealt in the range of 9.00-9.50 per cent, compared with 9.25-9.75 per cent.
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