ONGC places Rs 750cr certificates of deposit with two public banks
Tamal Bandyopadhyay
Mumbai, Jan 23: ONGC placed Rs 750 crore worth of certificate of deposits (CDs) with two Mumbai-based public sector banks on Friday. The 90-day CDs were placed at 15 per cent. The fund has given a shot in the arm to the two banks reeling under liquidity crunch this week following the Reserve Bank of India's tight money policy.According to ONGC sources in New Delhi, the public sector organisation placed Rs 400 crore worth of CDs with Bank of Baroda and the rest went to Bank of India. The funds were parked with a heavyweight state-run bank in an instrument offering low yield. On maturity, ONGC decided against rolling over the monies and instead placed it at a higher interest rate with other banks, sources said. In a desperate bid to meet the short-term requirements, banks have jacked up interest rates on CDs over the last few days. Till early January, the interest rate on 90-day CDs was pegged at around 9 per cent. "There is no choice but to go for high cost CDs as it is hard to mobilise bulk deposits,"
one PSU bank chairman said. Some of the new private sector banks are offering 18-20 per cent to pick up CDs as the overnight call money shot up 100 per cent on Friday. Even though most deals were struck in the region of 60 to 90 per cent, there were takers at even 100 per cent. Hongkong Bank is believed to have borrowed at 100 per cent. Banks have hiked their short-term deposit rates by as much as 400 basis points this week and there has been a scramble for funds to tide over the liquidity crisis. A clutch of banks have moved rating agencies to get their CDs rated, rating agency sources said. "Till about December-end, corporates were making a beeline to get their commercial papers (CPs) rated. It is now the turn of the banks to get rated for CDs. The cost of funds is bound to go up in the third quarter of the current fiscal," sources said. With interest rates heading northwards, the CP market is fast losing its steam as corporates are switching to working capital loans linked to PLR. Till about a
month bank they were raising CPs at sub-PLR rates. Banks which kept away from the high-cost CDs over a year now are turning back to the CD market to bridge the short-term resource gap. The State Bank of India which got itself rated for Rs 5,000 crore worth of CDs and raised over Rs 4,000 crore CDs in 1995-96, has now a CD portfolio of about Rs 80 crore, SBI sources said. "There is a liquidity problem. We are not lending in the call market problem. We are managing by offloading short-term investments in the secondary market," SBI sources said. According to market sources, SBI has started sending feelers to cash-rich PSUs and corporates to mop up CDs at "competitive" rates. "We may have to incur a little extra cost to tide over the short-term crisis," sources said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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