SBI raises Rs725 crore through CD issuances at 5.90 per cent
10 Jun 2010
Banks continued to be net borrowers on Wednesday, raising Rs66,170 crore from RBI at 5.25 per cent, the third consecutive day when banks have borrowed over Rs60,000 crore from the RBI by pledging government securities.
According to dealers, panic gripped the money market soon after country's largest bank, State Bank of India (SBI), stepped in to raise money by issuing certificate of deposits (CD). It raised Rs 725 crore though CD issuances on Tuesday at 5.90 per cent for six months and on Wednesday, it was looking at raising another Rs1,000 crore.
However, SBI pulled out as the investor-quoted rates were not acceptable to the bank.
According to a dealer the market was willing to buy CD only at 6.10 per cent for six months and SBI did not agree to it. However, at the same time, Reserve Bank of India agreed to pay 6.35 per cent for five months to raise Rs1,000-crore CD, indicating that banks are desperate to raise money.
In fact, according to SBI chairman OP Bhatt, the bank had borrowed money even from RBI. ''We are comfortable but not surplus, he told the media. ''We had borrowed from the repo window,'' he added.
The past 18 months have seen the SBI hold surplus liquidity in the range of Rs35,000-Rs50,00 crore. According to dealers any borrowing by SBI therefore creates panic. The tight liquidity condition since the beginning of this month is due to Rs68,000-crore outgo that telecom companies have to pay to government as licence fee for third generation bandwidth.
