Cp Rates On The Decline

The rates on commercial paper have started declining following the cut in bank rate. Larsen & Toubro has reduced the interest rate on its 364-day paper offering. The top rated issue, priced earlier at 11.75 per cent, will now be offered at 11.25 per cent.

Says a banker with a foreign bank: There will, however, be a time lag before the rates come down as their (companies) cost of funds has not gone down substantially. The rates on CPs will come down to 6.5-7 per cent for one-month maturity and 10 per cent for six months, said a senior treasury official with a public sector bank.

 

With the cut in rates, companies planning debt issues have put their plans on the backburner. This is the second time in three months that rates on commercial papers are coming down.