Yields on three-month commercial papers have shot up to a near 20-month high, hurting borrowers as tight liquidity conditions in the market may push up the rates further on soaring demand for loans and rising inflationary expectations.
Co gets applications worth Rs 425 cr against the targeted Rs 3,400 cr; future bonds may now offer better rates.
Liquidity has once again turned scarce in the inter-bank money market, forcing RBI to play the role of lender. On Tuesday, banks borrowed as much as `77,935 crore to meet their cash reserve ratio requirement.
With the partially-convertible Indian rupee touching a record 6-month high of 44.38 against the dollar, the chorus from exporters demanding intervention by RBI is getting louder.
When the domestic currency strengthened to 44.85 against the dollar - almost a Rs 2 gain from the 46.84 levels two weeks ago on September 7, there was a small set of corporates who celebrated.
Bankers are betting that rates will go up despite the fact that the impact of the previous rate hikes is yet to be felt.
Banks are also awaiting RBI’s mid-policy review, slated to come out by September 16 to see if RBI would loosen its tight grip on liquidity, as headline inflation has eased.
Yields on commercial paper have touched a one-year high with most issues by top corporates placing three-month debt at a range of 7.60-8 %.
Infrastructure Leasing and Financial Services has floated a 25-year corporate bond - the first by a corporate entity.
Many Indian companies are locking the interest rate on their foreign loans. These loans, better known as external commercial borrowings, are usually given on floating rate of interests that are reset every six months.
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