Canara, Axis, OBC plan to raise up to Rs 14k cr via CDs

With the financial year drawing to a close, banks are stepping up raising short-term resources through certificate of deposits (CDs). Three banks — Axis Bank, Canara Bank and Oriental Bank of Commerce — plan to raise up to Rs 14,000 crore through CDs.

Axis Bank has hiked its limit for CDs issuance to Rs 10,000 crore from Rs 3,500 crore. Rating agency Icra has assigned an A1+, indicating highest credit quality, to the bank’s deposit programme. The rating also takes into account comfortable low cost deposit mix, strong brand name, expanding network and comfortable liquidity profile.

Bangalore-based Canara Bank has enhanced CDs issuances to Rs 20,000 crore from Rs 15,000 crore. Icra has assigned A+ for the bank’s financial instrument.

The ratings also take into account the competitive operating cost structure, given the bank’s large branch network and the comfortable regulatory capitalisation levels and liquidity position.

The cost of deposits still remained high as a result of the legacy high-cost deposits raised by the bank over the past one year.

The management’s efforts to reduce high cost deposits and rebalance the credit portfolio could start generating higher interest spreads over the medium term, Icra said

Canara’s core profitability improved during the nine months ended December 2008 to 1.7 per cent as compared to 1.5 per cent due to the improvement in the net interest margin to 2.4 per cent as compared to 2.1 per cent during the same period.

Oriental Bank has raised the ceiling for raising resources through CDs from Rs 10,000 crore to Rs 12,500 crore. Crisil has assigned “P1+” rating to deposit programme.