SBI raised 3 month CD for the first time in a decade
Premium- The return on the CD issued by SBI is around 10 basis points higher than the cutoff yield on 91-day Treasury bills auctioned by the government on Wednesday
MUMBA : The country’s largest bank State bank of India has tapped the short term debt market after nearly a decade, raising three month money worth ₹2000 crore by issuing certificate of deposit at 3.8%, according to two people aware of the matter. The return on the CD issued by SBI is around 10 basis points higher than the cutoff yield on 91-day Treasury bills auctioned by the government on Wednesday.
“This is just an additional source of funding for SBI in case the need arises in the next financial year. This is just to test the market," said a person aware of the matter.
SBI has so far kept away from the short term debt market as it is flush with liquidity. Its deposits grew by 13.56% year on year to ₹36.81 lakh crore at the end of March 2021. Advances grew by 4.8% to ₹25.39 lakh crore. Assuming a 10% growth in both advances and deposits at the end of March 2022, SBI will still see deposits outpacing advances this fiscal year.
Total bank credit grew by 8.2% year on year to ₹1,15,82,442 crore for the fortnight ended January 28, 2022 while aggregate deposits increased by 8.3 per cent year on year to ₹1,60,32,905 crore for the fortnight ended January 28, 2022.
On 15 February, SBI raised interest rates on some of its retail term deposits by 10-15 bps.
“This shows that liquidity is surplus in the market. Banks park this excess liquidity in instruments like variable reverse repo rate. But liquidity with market participants can be invested only in debt instruments like commercial papers and certificate of deposits. These investors cannot put this surplus liquidity in bank deposits. Otherwise SBI has no shortage of liquidity," said Ajay Manglunia, managing director and head- institutional fixed income, JM Financial.
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Liquidity in the banking system is currently estimated to be in a surplus of over 7.12 trln rupees.
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