CP discount hits 10% as rates rise

Outstanding Amount
(Rs crore)

Discount
Rate 
range
(%)

Jun 15, 2002

8,293

7.65-10.25

Mar 31, 2003

5,749

6.00-7.75

Mar 31, 2004

9,706

4.50-6.50

Mar 31, 2005

13,418

5.20-7.25

Mar 31, 2006

12,767

6.69-9.25

Dec 31, 2006

23,336

7.74-10.00

   The issuance of CPs by corporate has been rising rapidly since 2003-04. The outstanding amount of CP increased from Rs 577 crore in March 1993, to Rs 1,500 crore in March 1999, to Rs 13,000 crore in March 2006 and now to Rs 23,336 crore.  The discount rate range on CPs in the fortnight ended December 31, 2006 was wider at 7.74-10 per cent, suggesting volatility in money market rates. In normal times, the discount rate is less than 1.5 per cent.  Banks have also increased their resources raising through issue of certificate of deposits (CDs). The amount of CDs outstanding has touched Rs 70,000 crore, nearly double since April 2006.  There has been a steady increase in CDs as liquidity in the system has been tight and banks have been just managing to meet lending requirements.