Banks issue 6-month CDs

Banks issued certificates of deposit (CDs) with a maturity of six months today, as mutual funds, who received inflows in liquid schemes, were keen to invest in such papers, dealers said.

“The rates are good enough for us to raise funds. The rates have more or else remained at these levels this month,” said a dealer at a state-owned bank.

Today, banks placed CDs worth Rs 2,055 crore as against Rs 760 crore on Monday. However, banks were investing in papers with maturity of more than six months, dealers said.

“Mutual funds are only investing in papers with maturity of six months and lower. They received inflows in their liquid schemes and so were investing heavily in CDs today,” said a dealer with a mutual fund.

Mutual funds are also cautious on their investments as they may start facing redemptions from this month end, dealers said.

Three-month certificates of deposit were quoted at 5.90-6.15 per cent, unchanged from Monday. Three-month commercial papers also remained unchanged at 9.50-10.00 per cent.