Business Daily from THE HINDU group of publications
Friday, Feb 22, 2008
ePaper | Mobile/PDA Version
Business Daily from THE HINDU group of publications Friday, Feb 22, 2008 ePaper | Mobile/PDA Version |
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Money & Banking
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Fixed Deposits Corp Bank lifts Rs 300 cr from NPCIL for 9.87%
The sources said that besides public sector banks, private banks were also in the fray for the bulk funds. C. Shivkumar Bangalore, Feb. 21 Corporation Bank has pipped rival public sector banks in the race to pick up bulk deposits from Nuclear Power Corporation of India (NPCIL). Banking sources said that Corporation Bank had bid 9.87 per cent for Rs 300 crore bulk deposits of one year duration from NPCIL and lifted the funds through placement of certificates of deposit. The effective cost after factoring in reserve ratios (cash reserve ratio and the statutory liquidity ratio) was likely to be about 40-50 basis points higher. The sources said that besides public sector banks, private banks were also in the fray for the bulk funds. Some of the private sector banks had bid even higher rates of over 10 per cent. The high rates were seen due to tight liquidity conditions as oil refiners were drawing down their credit lines, for funding their dollar purchases. The higher drawdown is happening as oil prices have topped $100 a barrel. Bankers said that in addition to cash surplus public sector undertakings, mutual funds and non-life insurers were also parking funds in CDs to take advantage of the high yields. Insurers had picked up CDs floated by private sector bank ING Vysya at 10.2 per cent. The bankers said a slow down in capital inflows had also resulted in reduced RBI interventions in the foreign exchange markets leading to a shortage of rupee liquidity. The deceleration in FII flows were partly due to funds anticipation of a further reduction in the US Fed Funds rates and accordingly profit in the event of a Treasury bond rally. Fed funds are the overnight borrowing rate between banks and savings institutions in the US. Some of the FIIs were also moving back home to offset losses and capital deterioration due to the sub-prime meltdown. Some bankers said that the high bids were also in expectation of firm call rates next month, when advance tax payments begin. But a temporary respite to the tightening liquidity situation appeared to be taking place. This was evident from the reduced recourse to the RBI’s liquidity support window. At Thursday’s liquidity adjustment facility auction, bids dropped to Rs 18,710 crore from just 9 bidders. At Wednesday’s auction, the recourse to the repurchase window, implying purchase of securities by the RBI, was Rs 20,905 crore from 15 banks. The reduction, bankers said, was partly on account of redemption of some T-bills issued last year. The redemptions amounted to about Rs 4,500 crore, that partly helped to alleviate the tight liquidity situation. In addition, inflows for the initial public offering of Rural Electrification Corporation also helped relieve the liquidity situation. Close to Rs 4,500 crore has flown into the banking system for subscription of this IPO, bankers said. More Stories on : Fixed Deposits | Power | Public Sector Banks
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