Banks resume issuing CDs

Issuances of certificates of deposits (CDs) rose on Thursday as mutual funds received inflows in their liquid schemes and were investing in papers maturing in September, dealers said.

“There were buyers in the market on Thursday. The rate bids from mutual funds were also not very high and so these rates looked attractive for us to raise funds,” said a dealer with a state-owned bank. According to the recent guidelines from Securities and Exchange Board of India (Sebi), mutual funds can invest funds received in their liquid schemes only in papers that mature within six months.

“Mutual funds received inflows in their liquid schemes and so were investing in CDs maturing by September,” said a dealer with a mutual fund. On Thursday, banks placed around Rs 2,200 crore of CDs maturing by September.

This week banks had not placed any CDs as the rates offered by them were much lower than what the investors were asking for, dealers said. According to bank dealers, the rates on six-month papers may also rise next week after Sebi rules take effect and so they preferred to raise funds at the existing levels. Three-month CDs were quoted at 6.00-6.25 per cent, unchanged from Wednesday.

Three-month commercial papers were quoted at 9.75-10.25 per cent, against 10.00-10.50 per cent. On Wednesday, Bajaj Auto Finance placed Rs 100 crore of one-year commercial papers at 10.90 per cent.