Issuances of certificates of deposit persisted on Tuesday because most banks raised funds to shore up their deposits and refinance existing papers, dealers said. Banks usually raise funds towards the end of a quarter to boost their deposit base.
On Tuesday, banks raised around Rs 4,700 crore via CDs, as against Rs 4,200 crore on Monday. So far this month, banks have raised Rs 36,800 crore through CDs as against Rs 25,300 crore in November. Banks also issued CDs due to tight liquidity in the banking system. Since April, rates on three-month CDs have risen 380-400 basis points.
Bank deposits were down Rs 11,699 crore as on December 3 on a fortnightly basis, while bank credit was up Rs 36,499 crore. Deposits, however, rose 14.97 per cent on year to Rs 48.38 lakh crore and loans grew 23 per cent to Rs 35.94 lakh crore.
Three-month CDs were dealt at 9.10-9.20 per cent, as against 9.05-9.25 per cent Monday. Three-month commercial papers quoted at 9.35-9.55 per cent, as against 9.40-9.60 per cent.
