Banks continued to place certificates of deposit (CDs) on the view that rates may rise in near future if the Reserve Bank of India (RBI) hiked cash reserve ratio, dealers said.
“Banks were issuing CDs to refinance papers that mature in January,” said a dealer at a state-owned bank. Most market participants expect RBI to hike CRR by 50 basis points to drain excess liquidity from the system.
On Monday, along with mutual funds, banks also bought CDs due to surplus cash with them. A total of Rs 2,550 crore of CDs were placed on Monday, compared with Rs 975 crore on Friday.
Rates, however, remained unchanged in the short-term corporate debt market as most fund managers await RBI’s third quarter monetary policy review on January 29.
Three-month certificates of deposit were quoted at 4.35-4.50 per cent, while three-month commercial papers (CPs) were quoted at 4.80-5 per cent.
One-year CDs were quoted at 5.90-6 per cent.
