An improving liquidity outlook will benefit commercial paper (CP) issuances in the coming months, India Ratings and Research said in a report.
The Reserve Bank of India(RBI) announced a record dividend of Rs 2.1 trillion to the government for 2023-24(April-March), which will help ease the ongoing pressure on the banking system deposit accretion and overall rates in the system.
Post the announcement of the RBI’s dividend, the overall money market rates have started softening.
“The record dividend transfer will help ease the pressure on short-term rates significantly. Short-term rates will benefit from an improving outlook on system liquidity, and reduced reliance on certificates of deposits, which will reduce the supply of money market issuances,” the rating agency said.
Corporates raised Rs 30,900 crore in May through commercial papers, higher than Rs 28,400 crore in April. Together, non-banking financial companies and housing finance companies issued commercial papers worth Rs 52,400 crore.
The total number of issuers for whom commercial papers are maturing in the next three months is 205; of which the top 10 issuers account for Rs 1.2 trillion. The remaining 53% of the total aggregate amount is accounted by the balance commercial paper issuances.
“Easing pressure on short-terms rates will benefit a section of NBFCs, as NBFCs with better credit profiles and shorter duration assets could incrementally increase the exposure to commercial papers amid the need for diversification from heavy reliance on banks”, Soumyajit Niyogi, Director, Core Analytical Group, India Ratings and Research said.