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Gilts dazzle companies

Calcutta, Dec. 4: With banks showing a clear reluctance to accept large deposits, companies have started parking their short-term surpluses in highly liquid government securities like T-Bills.

Reserve Bank of India sources from Mumbai said that companies parking their funds in T-Bills include top multinationals, pharma companies and some cash-rich public sector undertakings like Mahanagar Telephone Nigam Limited. They added that in the process, most firms have been booking risk-free returns of up to 6 per cent.

Bankers said these companies normally park short-term surpluses in current account deposits. However, banks are shying away from accepting large deposits since deployment avenues are very limited.

“All banks are flushed with funds and there is hardly any credit offtake. The short-term surpluses of the companies could be deployed in call money markets. But prudential norms put in place by the RBI this year limits the funds that could be deployed in the call markets. Besides, paying rates of up to 5 per cent and deploying the funds in call is not a profitable proposition for banks,” a senior official of Allahabad Bank said.

The corporates themselves are upbeat about investing in T-Bills. “There is a recent trend among corporates to invest in T-Bills. Since these are the liabilities of the Government of India, they are zero-risk short-term investments at market yields for a period of their choice. Further, two-way quotes are available in the secondary market to enable anyone to invest and exit from such investment,” a top ITC official said.

Further, T-Bills can be parked in the constituent SGL account with Discount and Finance House of India itself till maturity or re-sale. Thus, transactions are hassle free and there is no need to handle securities in the physical form.

T-Bills are short-term (up to one year) borrowing instruments of the Government of India. T-Bills are auctioned by the Reserve Bank of India at regular intervals. They are issued at a discount to face value and on maturity the face value is paid to the holder.

Currently, the RBI issues T-Bills for four different maturities—14 days, 91 days, 182 days and 364 days. Investors with short-term surpluses can buy these bills. Market analysts say companies are hesitant to park funds either in the inter-corporate deposits (ICDs) or in the commercial papers (CPs) or corporate debts.

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