SBI's Hare Krishna Jena: Enough liquidity in the system; money coming in at a cheaper rate

There is enough liquidity in the system for the banks to lend to firms, said Hare Krishna Jena, deputy managing-global markets at the State Bank of India (SBI), in an interview with CNBC-TV18.

“I think a lot of liquidity is there in the system. So naturally the banks would be trying to deploy their funds in companies. So they are getting it at a cheaper rate. However, the issue is that so far as the tenor is concerned, this is only for the CP market. So many of the companies can borrow funds that are even lower than the repo rates. So far as the tenors are concerned, three-five years is still much above the G-Sec levels,” he said.

On ranges in the rates, he added, “Three year AAA, if it is a PSU, it could be between 6.30 and 6.60 depending on which public sector undertaking (PSU) it is and the top-rated AAA also would be around closer to that, not much above that. There is a possibility that the PSUs — if the liquidity continues to be like this, they can raise it very easily.”

He added: “So far as the risk aversion is concerned, it is still there in the market. Probably the private side will have some problem except a few names."

On yields over the last quarter, he said: “As far as the public sector enterprises are concerned, mostly the yield compression has taken place in those spectrum. A lot of liquidity would be chasing them. So far as private sector is concerned, only a few top notch names — their yield has been compressed between 30 and 40 basis points (bps).”

Speaking about shorter-term CPs, he said people are able to raise short-term money at sub-5 percent.